When Vegas Comes to Wall Street : Associations Between Stock Price Volatility and Trading Frequency Among Gamblers

Previous research has associated levels of disordered gambling symptomology with stock market trading frequency and high-risk investments. We build on these studies via an incentivized experiment, in which we examine how manipulated levels of market volatility affected trading frequency. Gamblers (N=604) were screened based on the existence of household investments and recruited across the four categories of the Problem Gambling Severity Index. The volatility of stocks was manipulated between-participants (high vs. low). Participants traded fictitious stocks across 30 simulated days and were provided bonuses based on the results of their trading activity (M=US$4.70, range=[0, 16.99]). Participants traded more often in the high volatility market, and this finding remained robust after controlling for financial literacy, overconfidence, age, and gender. Exploratory analyses show that the effect of volatility manipulation was strongest among participants who were not high-risk gamblers. In comparison, highest-risk gamblers traded more frequently regardless of volatility levels. Many investors trade more frequently than personal finance guides advise, and these results suggest that gamblers are more likely to make this error in more volatile markets. The potential for financial harm due to excessive trading is higher for those perceived as low-risk, and less likely to be the target of gambling interventions