The Risks of Greed and Fear in Financial Decision Making

My research aims at uncovering the differences in traders’ strategies, performance, and behavioral biases under different compensation schemes and in different economic environments. Reward schemes of traders finally define trading strategies of large corporations and funds, which are becoming more and more powerful players in the stock market. Understanding behavior under different reward schemes will help investment firms be able to design better incentive schemes for their traders and introduce circuit breakers to trades to prevent collapses. In my current work I focus on two different reward schemes, linear and convex ones.