On Trading Decisions, Performance, and the Role of Personal, Emotional Factors. A Real-Life Stock Market Experiment on how Underlying Factors Affect Financial Decision-Making in a Trading Environment

University essay from Handelshögskolan i Stockholm/Institutionen för företagande och ledning

Abstract: The complexity in management discourse concerning Human Resource Management practices, specifically recruitment processes of entry level professionals, discern a gap between theoretical knowledge and practical experience. Respectively, research is scarce on the topic of financial decision-making and performance by non-professional traders, in this case business students. As such, this thesis aims at investigating this duality by studying the role of personal and emotional factors. Through an experiment, a stock-trading simulation, 14 students traded for 2,5 consecutive hours, providing the opportunity for use of theoretical knowledge and experience. Observed trends showed that high performing individuals were characterised by their ability to specialise in markets, high numerical abilities, proclivity for positive emotions when trading, and tendency for pessimistic predictions about their future earnings. Empirical findings regarding participants' decision-making posited the presence of the disposition effect. The managerial implications of this thesis support the use of simulations in recruitment processes for organisations. And the relation of seemingly unconventional variables with prediction of performance levels.

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