Journal of Banking and Finance 106 (2019) 357–370

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Journal of Banking and Finance

journal homepage: www.elsevier.com/locate/jbf

National culture and individual trading behavior

Gary Tan∗, Chee Seng Cheong, Ralf Zurbruegg
Business School, University of Adelaide, Australia

a r t i c l e i n f o a b s t r a c t

Article history: We study the role of national culture in influencing the trading behavior of individuals. We achieve this
Received 24 August 2018 by analyzing the trading patterns of participants trading in a simulated asset market where decision out-
Accepted 8 July 2019
comes are framed in terms of both gains and losses, and under different externally imposed constraints.
Available online 9 July 2019
By analyzing the trading history of participants from 21 countries and territories, we show that an indi-
JEL classification: vidual’s cultural background significantly impacts how often they trade, the size of their trades and how
G12 long they keep their positions open in the market. Our results are robust when controlling for personal
G41 and social characteristics of the traders and for how rewards are offered to traders. Overall, our research
shows how culture relates to trading behavior and has implications for the liquidity and risk profiles of
Keywords:
exchanges around the world.
Culture
© 2019 Elsevier B.V. All rights reserved.
Risk-taking
Trading behavior
Simulated trading

1. Introduction
Research has shown that national culture has a significant bear-
ing on financial decision making. Whether that be in relation to
corporate strategies (Chen et al., 2015; Chui et al., 2016), portfo-
lio investment (Anderson et al., 2011; Siegel et al., 2011) or general
stock market behavior (Chui et al., 2010; Eun et al., 2015). Despite
the breadth of this literature, it is based on macro-level analysis.
This leads us to question whether it is possible to observe cultural
impacts at the micro-level. In particular, if national culture is a sig-
nificant determining factor in how individuals make financial de-
cisions, then it should also influence their behavior when trading
financial instruments.
The current lack of evidence at the micro-level is partly due
to the difficulty in capturing individual investors’ trading behav-
ior in the financial markets and, in particular, in relation to their
personal traits and cultural background. Research that examines
the former includes work by Barber and Odean (20 0 0, 20 01) and
Graham et al. (2009) who use unique datasets to capture individ-
ual investor trading behavior. However, this type of dataset cannot
be applied to capture the impact of culture on trading activity as it
first requires the ability to observe a broad cross-section of traders
from different cultures, and then the ability to directly associate
each trader with their cultural heritage. While researchers can
observe how aggregate trading behavior varies by culture across
countries (Chui et al., 2010; Eun et al., 2015), the channel by which
∗
Corresponding author.
E-mail address: Gary.Tan@adelaide.edu.au (G. Tan).
this naturally occurs (i.e., through the aggregation of the individual
trading behavior of market participants) is not observable. In fact,
research examining how culture influences stock markets by focus-
ing on cross-country differences must contend with several con-
founding effects that can obscure the relationship. These include
regulatory, institutional and legal differences (Roll, 1992; La Porta
et al., 1998; Morck et al., 20 0 0), all of which will affect the risk
appetite of investors.
This motivates us to examine how culture affects trading be-
havior within an experimental setting. Doing so will provide re-
sults that are uncontaminated by the institutional differences that
stock exchanges operate under, while allowing us to directly ob-
serve the trading behavior of participants from different cultural
backgrounds. To achieve this, we map the cultural background of
traders that participate in an automated trading simulation to de-
termine how it affects their trading behavior.
We align our methodology with the experimental works of
Deaves et al. (2009) on the influence of overconfidence on trad-
ing, and Andrade et al. (2016) on emotions during market bub-
bles, and use an experimental asset market framework to inves-
tigate the relationship between an individual’s cultural background
and trading behavior. In doing so we depart from the extant liter-
ature that tends to use hypothetical lotteries to examine risk mo-
tives (Noussair et al., 2013; Rieger et al., 2015; Wang et al., 2017).
Moreover, in setting up our simulated asset market, we draw on
prospect theory (Tversky and Kahneman, 1981) to account for how
individual risk taking is affected by how a situation is framed.
We investigate the trading behavior of university students who are
studying toward a finance major using four games that are framed

https://doi.org/10.1016/j.jbankfin.2019.07.007
0378-4266/© 2019 Elsevier B.V. All rights reserved.
358 G. Tan, C.S. Cheong and R. Zurbruegg / Journal of Banking and Finance 106 (2019) 357–370
as either “gains” or “losses” for course credits. These games involve
trading futures contracts with the goal to maximize trading profit.
We then use the trading patterns of participants in these trading
games to compare how their trading behavior is associated with
their cultural background and with how the games are framed.
Following the lead of Barber and Odean (20 0 0, 20 01) and
Graham et al. (2009), we construct three primary measures of
trading behavior that capture risk-taking that are then used as
our dependent variables. Namely Trade Size, Trade Frequency and
Trade Volume. Following the extant literature, we primarily use
Hofstede’s (1980, 2001) cultural dimensions to categorize a per-
son’s cultural background. The finance literature has previously
utilized Hofstede’s measures of individualism (Chui et al., 2010;
Eun et al., 2015); masculinity (Anderson et al., 2011); power dis-
tance (Gorodnichenko and Roland, 2011) and uncertainty avoidance
(Kwok and Tadesse, 2006) to examine a wide range of behavioral
traits in how investors, as well as corporations, behave. For our
study, we focus on two national cultural dimensions that should
be directly related to the level of risk taking in trading.
The first dimension we use is Uncertainty avoidance, which re-
flects the extent to which societies are comfortable with ambiguity
and uncertainty (Hofstede, 2001). As it is a measure of the ability
of individuals from a society to cope with uncertainty and taking
positions in the market involves a substantial amount of uncer-
tainty, we expect that it will be negatively associated with the will-
ingness to take risk when trading. The second dimension we em-
ploy is Masculinity, with a high score indicative of a society driven
by the dominant values of competitiveness, achievement and a
drive to win. Anderson et al. (2011) associates masculine-leaning
societies with individuals having a tendency towards being over-
confident and holding greater self-attribution biases, which have
been shown to affect trading behavior (Barber and Odean, 2001).
We therefore posit that with an increased overconfidence and de-
sire to win, traders originating from states with high Masculinity
will take more risks.
Benefiting from a diverse cohort of students from around the
world, we capture information on students’ cultural background,
plus a number of other personal characteristics that we use as con-
trols in our multivariate analysis, through a voluntary survey that
is conducted prior to the trading games. Our sample consists of in-
dividual trade data from trading games that all final-year under-
graduate and postgraduate student cohorts enrolled in a deriva-
tives course must participate in for an assignment. Students can
take long or short positions in futures contracts, as long as all po-
sitions are closed-out at the end of each game. A total of 1237
students participate in these experiments over the course of four
semesters, yielding 192,715 individual trades (both buys and sells).
However, only 228 (18.4%) students responded to the voluntary
survey, reducing the sample size of usable observations to 42,597
individual trades.
We use the above individual trades to generate measures of
trading behavior at the session-level. Our a priori expectations are
that Trade Size, Trade Frequency and Trade Volume have a negative
(positive) association with Uncertainty avoidance (Masculinity). By
default, greater Trade Volume, captured through either larger Trade
Size and/or higher Trade Frequency, implies increased exposure to
the market.
Univariate analyses provide preliminary support for our expec-
tations. When we split our sample between individuals from high
and low Uncertainty avoidance and Masculinity scoring societies, we
find that our three measures of risk taking are all different be-
tween the two cohorts at the 1% significance level. Our baseline
multivariate results also show a persistent impact of Uncertainty
avoidance and Masculinity on an individual’s risk taking in trading,
with all the relationships continuing to be statistically significant.
The results are also economically meaningful with, for example, a
one standard deviation increase in Uncertainty avoidance leading to
an approximate 26.0% reduction in Trade Volume, aided by a 29.3%
fall in Trade Frequency and a 15.6% drop in Trade Size.
Our results hold when we control for a number of personal
characteristics that are known to influence risk-taking behav-
ior. These include gender (Barber and Odean, 2001), birth
order (Sulloway and Zweigenhaft, 2010); pre-natal testos-
terone exposure (Coates et al., 2009); trading experience
(Feng and Seasholes, 2005) and major personal loss occurrences
(Malmendier and Nagel, 2011). We also include risk measures to
capture an individual’s willingness to engage in risk-taking. In
recognizing that risk attitudes and behaviors can change depend-
ing on the situation, we follow Bapna et al. (2010) and use the
financial risk domain score from Weber et al. (2002) Domain-
Specific-Risk-Taking (DOSPERT) survey. We also include two
measures developed by Zaleśkiewicz (2001) that capture the
instrumental (rational decision-making) and stimulatory (thrill-
seeking) motivations of individuals to take risk. At the state-level,
we include GDP per capita to proxy for wealth effects and market
capitalization over GDP to proxy for the relative importance, and
thereby familiarity, individuals from a country will have with the
capital market. We also include dummy variables to capture the
dominant religion in the state (Noussair et al., 2013) as well as
fixed effects to control for differences between the games and
sessions that traders participate in.
We show our results are robust to framing and endowment ef-
fects, plus show the impact that culture has on the disposition ef-
fect. In particular, we demonstrate that individuals from societies
that will be more risk tolerant hold onto open positions for longer,
and that this varies depending on whether it is a losing or win-
ning position. We also show our results hold when we equally
weight our observations by country, and when we consider al-
ternative proxies to Hofstede’s measures to capture culture. These
include the Assertiveness culture measure from the GLOBE study
(House et al., 2004) and the Cultural Looseness measure of Gelfand
et al. (2011).
Our paper contributes to the growing literature on the impact
that cultural differences have on financial decision making. While
prior research has focused mainly on macro-level analyses (Chui
et al., 2016; Eun et al., 2015; Siegel et al., 2011), we provide, at
a granular level, direct evidence of how it impacts trading behav-
ior. In doing so we are the first, as far as we are aware, to specif-
ically capture how culture can impact an individual’s propensity
to trade, and the manner in which the person trades. We there-
fore also contribute to the extant literature that shows how indi-
vidual traits of investors can affect trading behavior (Barber and
Odean, 20 0 0; 20 01; Graham et al., 20 09).
In addition, our analysis avoids the confounding effects of dif-
ferences in institutional environments across stock exchanges that
can substantially impact trading behavior (Roll, 1992; La Porta
et al., 1998; Morck et al., 20 0 0), thereby providing us with an un-
obstructed picture of how culture impacts the trading activity of
individuals. Our results show that the impact of an individual’s cul-
tural background persistently affects their trading behavior, thus
providing direct evidence of how culture can lead to differences
in the liquidity and risk appetite of stock exchanges around the
world.
The rest of this paper is organized as follows. Section 2 outlines
our hypotheses while Section 3 describes our data and method-
ology. Empirical results and robustness tests are presented in
Sections 4 and 5, respectively. Section 6 provides a conclusion.
2. Hypotheses development
Hofstede (1980, 2001) defines culture as “the collective pro-
gramming of the mind that distinguishes the members of one
 G. Tan, C.S. Cheong and R. Zurbruegg / Journal of Banking and Finance 106 (2019) 357–370
group from another”. Implicit therein is the notion that culture is
a communal element that arises from individual conduct. Recent
studies find evidence that culture affects stock price behavior at
the macro-level. For example, Chui et al. (2010) show how it affects
the returns on momentum strategies and Eun et al. (2015) provide
evidence it affects stock price synchronicity. Since stock price be-
havior reflects the aggregate action of all individuals’ trading activi-
ties, these findings suggest that cultural values will lead individuals
to have distinct risk-taking preferences when they trade. Therefore,
based on the assertion that culture regulates the risk-taking pref-
erences of investors, we arrive at our primary hypothesis that:
H1. Culture directly affects an individual’s trading behavior.
The question then is how do we capture culture and precisely
what type of trading behavior is likely to be affected? To answer
the first part of the question, we primarily focus on two aspects of
national culture outlined by Hofstede (1980, 2001) – namely Un-
certainty avoidance, and Masculinity. In the case of the first mea-
sure, Uncertainty avoidance captures the level of societal comfort
with ambiguity and uncertainty. In many cases, the finance liter-
ature finds that this manifests in choosing financial solutions that
minimize risk. For example, Kwok and Tadesse (2006) find that in
the context of the financial markets, countries with a high Uncer-
tainty avoidance score are more likely to have bank-based financial
systems which are focused on risk reduction and the smoothing
of inter-temporal risk. Chui and Kwok (2008) show that nations
with a high Uncertainty avoidance consume more life insurance and
Anderson et al. (2011) find that institutional investors in countries
with high Uncertainty avoidance have a greater home bias in their
portfolios and diversify less abroad. In our case, because trading is
invariably linked to uncertainty surrounding future value, we hy-
pothesize it will have a negative relationship with the proclivity to
trade:
H1a. Individuals from a cultural background with a lower Uncertainty
avoidance score are more likely to exhibit risk taking behavior in trad-
ing.
As for Masculinity, Hofstede (2001) associates it with being
“driven to win” in largely “achievement orientated” societies. In-
dividuals in these societies are also more likely to display more
assertiveness in seeking their goals. This can also lead to over-
confidence. Based on Barber and Odean’s (2001) observation that
males tend to demonstrate overconfident behavior when trad-
ing, Anderson et al. (2011) argues that masculine-based societies
will also be more prone to demonstrate overconfidence and other
self-attribution biases. Therefore, the urge to win, combined with
a potential predilection towards being overconfident in decision-
making, leads us to hypothesize that higher Masculinity will lead
to greater trading risks:
H1b. Individuals from a cultural background with a higher Masculin-
ity score are more likely to exhibit risk taking behavior in trading.
Our three primary measures to capture risk-taking in trad-
ing behavior are motivated by the literature that relates trad-
ing activities to risk-taking (Barber and Odean, 20 0 0, 20 01; Gra-
ham et al., 2009). These are Trade Size, Trade Frequency, and Trade
Volume. Excessive trading has been consistently attributed to in-
vestor overconfidence (Barber and Odean 20 0 0, 20 01), competence
(Graham et al., 2009) and familiarity (Chan and Covrig, 2012).
Also, Grinblatt and Keloharju (2009) analyze the role of sensation
seeking and overconfidence in investors’ tendency to trade and
find evidence that both attributes contribute to investors trading
more frequently. Sensation seeking, in turn, is significantly posi-
tively correlated with risky financial behavior (Horvath and Zucker-
man, 1993). Furthermore, Markiewicz and Weber (2013) study in-
359
vestors’ willingness to take risk using the DOSPERT gambling risk
propensity scale and find a positive correlation with trading vol-
ume. We therefore positively associate trading volume, trade size
and frequency with the willingness to take risk.
The above leads us to postulate that low (high) Uncertainty
avoidance (Masculinity) leads to traders from cultures with these
characteristics to trade more frequently and in larger quantities,
leading to total trading volume to also rise. This rationale provides
us with three testable hypotheses:
H1c. Individuals from a cultural background with a lower (higher)
Uncertainty avoidance (Masculinity) are more likely to exhibit greater
trading volume.
H1d. Individuals from a cultural background with a lower (higher)
Uncertainty avoidance (Masculinity) are more likely to trade larger
allotments.
H1e. Individuals from a cultural background with a lower (higher)
Uncertainty avoidance (Masculinity) are likely to trade more fre-
quently.
3. Data and method
To capture the trading behavior of individuals, we create an ex-
perimental asset market where individuals participate in four dif-
ferent trading games. Individuals trade the futures contracts of a
hypothetical commodity with each other using a custom-made on-
line trading platform that allows them to interact on a centralized
and anonymized exchange.1 Each game comprises of five trading
sessions, where each session lasts for five minutes. A short one-
minute break separates each session. Each trader starts with a fic-
titious $10 0,0 0 0 that they can trade with. The price of one futures
contract is always $10 0 0 at the beginning of a game and moves in
$10 increments which represent one tick.
As each game progresses, participants are able to observe the
price charts for both the futures and spot markets. The former
is populated by the trades of the participants while the latter is
driven by an algorithm that occasionally dispenses a news item.
Specifically, a generalized Wiener process drives the spot price,
with the drift and volatility rates impacted by the news event that
is introduced during the game to provide direction to the market.
The purpose of the news event is to provide fundamental informa-
tion on the general direction of the spot price that should then
assist traders in determining whether to take long or short fu-
tures positions. Participants can place limit orders or trade at the
best bid or offer. Orders are cleared on a price and time prior-
ity basis. Market depth is visible showing all bids and offers in
the queue, as well as volume traded. A quote board (displaying
open, high, low and close prices, and open interest) and an account
summary (showing account balance, profit/loss, margin utilization,
open and closed positions and working orders) are both updated
in real time.2 To ensure initial liquidity, ‘dumb’ robot traders offer
contracts slightly above (to buy) and below (to sell) the prevailing
market price. Overall liquidity, however, is not an issue in these
games due to the number of traders that are participating in the
simulated exchange.
While we only have personal information for 228 participants, a
total of 1237 traders were active over the four semesters the sim-
ulations were run, leading to 192,715 transactions. This equates to,
on average, 2409 transactions per session (or 7.8 transactions per
session per trader, based on having an average of 309 traders per
game).
1
We are grateful for a university grant to support the development of the trading
platform.
2
The Internet Appendix contains a screenshot mid-way through a game.
360 G. Tan, C.S. Cheong and R. Zurbruegg / Journal of Banking and Finance 106 (2019) 357–370
The four trading games have different characteristics.
The games are designed to simulate different framing ef-
fects in prospect theory, similar to Kirchler et al. (2005) and
Agnew et al. (2008). The purpose of doing this is to ensure that
our results are not simply an artefact of how we have framed
the games, which can lead to changes in risk perceptions. While
in all games traders are required to transact a minimum of four
times, with the overall goal being to secure a net trading profit
at the end of each game, their initial position and how rewards
(course credit) are awarded differs across the games. In Games 1
and 3, participants start with a notional one tick profit ($10) and
earn marks if they maintain a trading profit at the conclusion of
the game, whereas in Games 2 and 4 players are informed that
they start with a full set of marks but also a notional one tick
loss in their accounts. They will lose their marks if they cannot
generate a profit in their trading accounts by the end of the game.
The implication of the above schema for awarding marks across
the two games is that the first game is framed in terms of the
ability to gain credit with a notional endowment, versus playing
the second game where credit can be lost. These endowments
and framing effects will potentially lead to different risk-seeking
behavior. Traders playing in the first scenario should initially be
more risk-averse, as there will be an inclination to try and hold
onto the small profit they are already endowed with at the start
of the game, whereas we expect less risk aversion at the start of
the second scenario as players are sure to lose unless they can
trade away their initial, notional loss.
We also vary the pressure we place on traders to generate a
profit. While in Games 1 and 2 all that is required is for traders
to trade a minimum of four times and end up with a net profit at
the end of the game, in Games 3 and 4 they are required to gener-
ate a profit in at least two of the five trading sessions (of a game),
and also to trade in every session. This, by default, forces partici-
pants to trade more and thereby take more risk. In Games 1 and
2 participants may avoid trading in all but one session of a game
if they have already secured a profit, as a result of the endowment
effect (Kahneman et al., 1991), whereas in Games 3 and 4 this is
no longer possible. This necessarily translates into traders having
to take greater risks.
All four games are played concurrently in each round. Partici-
pants are randomly selected to play a different game in each round
such that by the end of round four every participant would have
played each game. Implementing game play in this manner avoids
any bias arising from, for example, a concentration of participants
playing under the same framing effect. Also, having all participants
playing different games at the same time is a realistic simulation
of real world trading where traders exhibit different framing ef-
fects. Likewise, in real markets, traders will trade under different
degrees of pressure to generate profits.
All students complete a two-hour workshop to practice and
gain familiarity with the trading simulation prior to the actual
games. Participation in the trading games is mandatory and relates
to an assignment that carries a 16% weighting towards the course
grade. Therefore, the incentive to perform in the games is driven
by the non-trivial mark that is assigned to it. Despite 1237 stu-
dents participating in these games over a period of four semesters,
only 228 completed the voluntary survey that we utilize to capture
an individual’s cultural and personal characteristics. Therefore, we
can only match 42,597 of the 192,715 trades to individuals that we
have additional data for. From this sub-sample, we aggregate each
individual’s trades to the session-level, potentially yielding 20 ob-
servations (4 games lasting 5 sessions each) for each trader. How-
ever, not all participants trade in every session, thereby leading to
a maximum of 4250 session-trader observations.
We then proceed to calculate our measures of trading behavior
that are the dependent variables in our multivariate panel regres-
sions. Specifically, for each participant, we calculate Trade Size as
the average trade size (in contracts) per session; Trade Frequency
as the number of orders that are executed per session; and Trade
Volume as the total trading volume (in contracts) within a session.
Appendix A1 contains details on how each measure is constructed.
Eq. (1) provides our general panel regression model, where
Trading Activity represents one of the three aforementioned mea-
sures, for each trader i in game j of session t.
T rading Act ivit yi jt = α + β1Cult ur ei + γ  Xi jt + εi jt (1)
Data for our explanatory variable, Culture, and most of the con-
trol variables (vector X), come from the voluntary survey. The sur-
vey asks a number of questions including “In which country did
you spend the majority of your time as a child (up to sixteen years
of age)?” We use this question to construct our explanatory vari-
able Culture, where we assign Hofstede’s Uncertainty avoidance and
Masculinity scores to all individual responses from the question.
The 228 respondents provide a suitable cross-sectional variation as
they come from 21 different societies with the Uncertainty avoid-
ance (Masculinity) scores ranging from 8 to 95 (36 to 70).
Our control variables consist of a number of personal and so-
cial traits that the literature has associated with risk-taking be-
havior. Given that gender has been linked with trading activity
(Barber and Odean, 2001) we utilize the dummy variable Female,
which is equal to one if the respondent is a female, and zero other-
wise. Including Female as a control variable also assists in control-
ling for differences in overconfidence and optimism levels, which
have been shown to be related to gender (Barber and Odean, 2001;
Jacobsen et al., 2014). Birth order has also been linked to risk-
taking behavior, with some evidence suggesting that the eldest
child is less likely to take risk (Sulloway and Zweigenhaft, 2010).
We set the dummy variable Eldest to equal one if the child is the
oldest in the family, and zero otherwise. We use Digit to capture
respondents’ exposure to pre-natal testosterone, as that too has
been associated with risk-taking behavior (Coates et al., 2009). If
a respondent’s ring finger is longer than their index finger the
dummy variable Digit is equal to one, and otherwise zero. There
is also evidence to suggest that risk aversion is affected by per-
sonal life experiences (Malmendier and Nagel, 2011). We therefore
count the number of times the respondent has experienced a sig-
nificant financial or personal loss to themselves or their immediate
family when growing up (Major loss). This latter variable is open to
some interpretation by the respondent, but for our purpose we use
it to gauge whether their perception of their childhood was more
or less ‘trouble-free’. Finally, we record how many years of expe-
rience the respondent has in trading (Experience) as per Feng and
Seasholes (2005). The internet appendix contains all survey ques-
tions used in this study.
Importantly, we include a measure to capture an individ-
ual’s domain-specific willingness to engage in financial risk-taking
and also a measure to capture an individual’s stimulatory (sen-
sation seeking) motivation to take risk. In particular, in not-
ing that risk attitudes and behaviors can change depending on
the situation, Weber et al. (2002) develop a survey to cap-
ture risk-taking across five different domains. One of these do-
mains relates to financial risk, which we then use to construct
our first risk measure that captures the financial risk profiles
of each trader. We follow Bapna et al. (2010) in constructing
the risk scores from the financial risk domain questions of the
DOSPERT survey. In addition, we use two measures developed by
Zaleśkiewicz (2001) that capture the instrumental and stimulatory
motivations behind taking risks. While the instrumental measure
captures a person’s inclination towards more cognitive/rationally
based risk-taking, the stimulatory risk-taking motivation has been
linked to gambling and, in particular, day trading behavior and ex-
cessive stock trading (Markiewicz and Weber, 2013). Given that
 G. Tan, C.S. Cheong and R. Zurbruegg / Journal of Banking and Finance 106 (2019) 357–370 361

Table 1
Descriptive statistics.

Countries and Territories No. Participants Mean Median Std. Dev.

Argentina 5 Dependent Variables

Australia 42 Trade Size 6.9551 5.8456 4.5236
Bangladesh 4 Trade Frequency 6.1184 4.5000 5.4279
Brazil 2 Trade Volume 48.6535 30.0000 54.4333
China 45
Germany 7 Culture Variables
Ghana 3 Uncertainty Avoidance 45.6097 40.0000 16.4713
India 11 Masculinity 57.4956 61.0000 8.9617
Indonesia 8
Italy 3 Control Variables
Malaysia 26 Female 0.3904 0.0000 0.4889
New Zealand 8 Eldest 0.2412 0.0000 0.4288
Pakistan 3 Digit 0.7193 1.0000 0.4503
Philippines 3 Experience 0.6053 0.0000 1.0629
Russia 4 Major Loss 0.8158 1.0000 1.0708
Singapore 2 Profit 3630.4825 775.0000 11,511.5974
South Africa 3 Session Return 0.0399 0.0200 0.0929
South Korea 2 Session Risk 0.0011 0.0011 0.0007
Taiwan 12 Risk Profile 22.7719 22.0000 4.9143
United Kingdom 25 Stimulating Risk 2.9611 3.0000 0.4545
Vietnam 10 Instrumental Risk 3.5263 3.5714 0.5297
Total Participants 228 LogGDPcap 9.5619 9.2048 1.1359
Marketcap 96.6957 92.6000 55.3403

This table presents the country distribution and summary statistics for the variables in the sample. All variables are defined
in Appendix A1.

Grinblatt and Keloharju (2009) show that both overconfidence
and sensation seeking can increase trading activity, including
Zaleśkiewicz’s (2001) stimulatory risk measure will allow us to
control for the latter effect. Moreover, the combination of using all
of the above three risk measures will better assist in separating
how much of the risk-taking an individual takes is driven by their
cultural orientation, rather than their personal risk profile.
In addition to the socio-demographic characteristics of the in-
dividual traders, we include Session Returns and Session Risk for
all traders that participate in a session. Also, we add Profit, which
records the amount of profit or loss the trader has recorded in
their trading account at the start of the session they are playing.
This allows us to control for the general performance of the trader
as they head into a new session. At the state-level, we include
the logarithm of GDP per capita (LogGDPcap), to capture wealth
effects, and also the market capitalization to GDP (Marketcap) to
account for the importance the capital market has in a country,
and thereby the likely exposure the trader will have had to it. To
account for the fact that religion can also play a part in explain-
ing risk-taking (Noussair et al., 2013), we include dummy variables
to capture each state’s dominant religion. Finally, we include game
and session fixed effects to account for any other unobservable
traits that have not been captured in the control variable set. It
should be noted that individual fixed effects are subsumed within
the variables capturing trader characteristics, as these are time in-
variant. Appendix A1 contains a list of all the variables used and
their definitions.
4. Empirical results
4.1. Summary statistics and univariate results
Table 1 shows the distribution of our participants by country,
with the two largest cohorts originating from China and Australia.
As for the trading activity, the average Trade Size per session in-
volves approximately 7 contracts, with slightly over 6 orders being
executed (Trade Frequency). Total average Trade Volume per session
is around 49 contracts per individual. In terms of the demographics
of our participants, 39% of the respondents are Female, while the
Eldest child makes up 24% of the sample. Moreover, 72% of partici-
pants have a longer ring than index finger (Digit) and, on average,
tend to have slightly over half a year of real trading experience.
In Table 2 we present the univariate results for tests of differ-
ences in means and medians for all our dependent variables with
respect to Uncertainty avoidance and Masculinity. We split our sam-
ple of respondents into two cohorts based on whether they have
high or low Uncertainty avoidance and Masculinity scores relative
to the median in the sample. Confirming our a priori expecta-
tions, these univariate results indicate that Uncertainty avoidance
and Masculinity are related to trading activity, with the differences
in means and medians between the two sub-samples significant
at the 1% level in all instances. As an example, low scoring Un-
certainty avoidance traders record a mean Trade Size of 1.75 more
contracts than high scoring Uncertainty avoidance traders. This rep-
resents a 31.3% increase. The mean Trade Frequency increases by
approximately 3 trades (54%) per session as one moves from the
low to high risk-taking sub-sample (i.e., a decline in Uncertainty
avoidance). Also, average Trade Volume per session increases by ap-
proximately 32 contracts (78%). Splitting the sample of traders by
Masculinity reveals a similar story.
4.2. Baseline multivariate results
Table 3 presents multivariate regression estimates of the rela-
tionship between our culture measures of Uncertainty avoidance
and Masculinity with trading behavior. For each trading measure
we show the results from three different types of regressions. The
first is a regression that considers the effect for each of the cul-
ture measures in isolation, and then when they are both included
in the same regression. All the regressions are conducted at the
session-level.
The results show that both culture measures are always signif-
icant at the 1% level except for the impact that Masculinity has on
Trade Frequency, which is only significant at the 10% level. There is
a decline, however, in the magnitude of the coefficients when both
measures are included within the same regression (i.e. columns
3, 6 and 9). This reflects that while both measures are cap-
turing different cultural dimensions that influence trader behav-
ior, as evidenced by each coefficient being statistically significant,
there is a cross-over in the information content captured by both
362 G. Tan, C.S. Cheong and R. Zurbruegg / Journal of Banking and Finance 106 (2019) 357–370

Table 2
Univariate results.

Uncertainty Avoidance Masculinity

Low scoring High scoring Difference Low scoring High scoring Difference
(1) (2) (1) - (2) (3) (4) (3) - (4)

Trade Size Mean 7.3297 5.5811 1.7486∗ ∗ ∗ 5.6414 7.9010 −2.2596∗ ∗ ∗

Median 6.5000 4.4000 2.1000∗ ∗ ∗ 4.8452 7.0000 −2.1548∗ ∗ ∗
Trade Frequency Mean 8.2508 5.3486 2.9022∗ ∗ ∗ 5.8947 8.4628 −2.5681∗ ∗ ∗
Median 5.0000 3.0000 2.0000∗ ∗ ∗ 4.0000 5.5000 −1.5000∗ ∗ ∗
Trade Volume Mean 72.9651 40.9890 31.9761∗ ∗ ∗ 46.5810 76.0017 −29.4208∗ ∗ ∗
Median 40.0000 18.0000 22.0000∗ ∗ ∗ 20.0000 42.5000 −22.5000∗ ∗ ∗

This table examines the univariate relationship between our measures that capture trading behaviour and our culture variables. We
perform t-tests (Wilcoxon/Mann-Whitney tests) to compare the means (medians) of each trading measure between the sub-sample
of low Uncertainty Avoidance (Masculinity) scoring individuals and high Uncertainty Avoidance (Masculinity) scoring individuals, with
the samples split at the median value. All variables are defined in Appendix A1. ∗ ∗ ∗ , ∗ ∗ and ∗ denote statistical significance at the
1%, 5% and 10% levels, respectively.

Table 3
Uncertainty avoidance, masculinity and trading behaviour.

Dependant Trade Size Trade Size Trade Size Trade Trade Trade Trade Volume Trade Trade
Variable Frequency Frequency Frequency Volume Volume

(1) (2) (3) (4) (5) (6) (7) (8) (9)

Uncertainty −0.083 −0.066 −0.116 −0.109 −1.004 −0.768

Avoidance (−16.853)∗ ∗ ∗ (−10.124)∗ ∗ ∗ (−9.579)∗ ∗ ∗ (−9.153)∗ ∗ ∗ (−10.504)∗ ∗ ∗ (−7.032)∗ ∗ ∗
Masculinity 0.116 0.061 0.117 0.026 1.564 0.739
(10.036)∗ ∗ ∗ (4.581)∗ ∗ ∗ (7.513)∗ ∗ ∗ (1.957)∗ (11.709)∗ ∗ ∗ (4.992)∗ ∗ ∗
Female −0.767 −0.622 −0.770 −0.714 −0.471 −0.716 −14.942 −12.643 −14.888
(−7.735)∗ ∗ ∗ (−5.592)∗ ∗ ∗ (−7.562)∗ ∗ ∗ (−2.764)∗ ∗ ∗ (−1.838)∗ (−2.776)∗ ∗ ∗ (−6.411)∗ ∗ ∗ (−5.470)∗ ∗ ∗ (−6.429)∗ ∗ ∗
Eldest −0.300 −0.341 −0.251 0.239 0.111 0.259 −4.889 −4.943 −4.227
(−1.995)∗ ∗ (−2.098)∗ ∗ (−1.615) (1.154) (0.514) (1.271) (−2.214)∗ ∗ (−2.225)∗ ∗ (−1.929)∗
Digit 0.498 0.586 0.469 0.279 0.461 0.267 0.160 2.098 −0.076
(3.600)∗ ∗ ∗ (3.980)∗ ∗ ∗ (3.288)∗ ∗ ∗ (1.157) (1.904)∗ (1.115) (0.063) (0.811) (−0.030)
Experience 0.250 0.243 0.238 −0.821 −0.818 −0.826 −4.224 −4.478 −4.439
(3.161)∗ ∗ ∗ (3.036)∗ ∗ ∗ (3.003)∗ ∗ ∗ (−8.202)∗ ∗ ∗ (−8.217)∗ ∗ ∗ (−8.279)∗ ∗ ∗ (−3.948)∗ ∗ ∗ (−4.222)∗ ∗ ∗ (−4.172)∗ ∗ ∗
Major Loss −0.046 0.012 −0.002 0.267 0.309 0.285 1.006 2.194 1.516
(−0.472) (0.111) (−0.024) (2.173)∗ ∗ (2.438)∗ ∗ (2.300)∗ ∗ (0.600) (1.244) (0.894)
Profit 0.006 0.006 0.006 0.006 0.006 0.006 0.097 0.094 0.097
(5.731)∗ ∗ ∗ (5.783)∗ ∗ ∗ (5.743)∗ ∗ ∗ (2.624)∗ ∗ ∗ (2.578)∗ ∗ ∗ (2.616)∗ ∗ ∗ (3.763)∗ ∗ ∗ (3.708)∗ ∗ ∗ (3.755)∗ ∗ ∗
Session −1.262 −1.252 −1.280 −2.374 −2.335 −2.382 −13.188 −13.535 −13.234
Return (−1.961)∗ ∗ (−1.911)∗ (−1.984)∗ ∗ (−2.159)∗ ∗ (−2.088)∗ ∗ (−2.173)∗ ∗ (−1.039) (−1.064) (−1.051)
Session −254.225 −264.485 −257.205 −509.468 −522.830 −510.749 −3953.089 −4065.916 −3938.319
Risk (−1.652)∗ (−1.700)∗ (−1.697)∗ (−1.864)∗ (−1.880)∗ (−1.874)∗ (−1.208) (−1.246) (−1.215)
Risk Profile 0.004 0.006 −0.001 −0.021 −0.013 −0.023 0.098 0.102 0.058
(0.257) (0.408) (−0.041) (−1.106) (−0.670) (−1.206) (0.507) (0.532) (0.299)
Stimulating 0.533 0.591 0.526 1.059 1.162 1.056 9.251 10.582 9.227
Risk (3.619)∗ ∗ ∗ (4.128)∗ ∗ ∗ (3.607)∗ ∗ ∗ (5.153)∗ ∗ ∗ (5.490)∗ ∗ ∗ (5.132)∗ ∗ ∗ (4.591)∗ ∗ ∗ (5.471)∗ ∗ ∗ (4.636)∗ ∗ ∗
Instrumental −0.203 −0.023 −0.086 −0.875 −0.720 −0.825 −7.208 −4.898 −5.900
Risk (−1.226) (−0.144) (−0.538) (−3.559)∗ ∗ ∗ (−3.073)∗ ∗ ∗ (−3.382)∗ ∗ ∗ (−2.943)∗ ∗ ∗ (−2.089)∗ ∗ (−2.395)∗ ∗
LogGDPcap 1.082 0.164 0.869 1.673 0.412 1.581 8.091 −0.803 6.070
(5.777)∗ ∗ ∗ (1.016) (4.999)∗ ∗ ∗ (11.259)∗ ∗ ∗ (2.722)∗ ∗ ∗ (9.776)∗ ∗ ∗ (5.577)∗ ∗ ∗ (−0.610) (3.837)∗ ∗ ∗
Marketcap −0.018 −0.011 −0.016 −0.002 0.007 −0.001 −0.078 0.003 −0.058
(−10.540)∗ ∗ ∗ (−5.799)∗ ∗ ∗ (−9.067)∗ ∗ ∗ (−1.212) (4.324)∗ ∗ ∗ (−0.714) (−4.246)∗ ∗ ∗ (0.166) (−3.116)∗ ∗ ∗
Constant 3.437 −1.014 0.446 −0.217 −3.926 −1.503 31.768 −39.413 −6.997
(2.512)∗ ∗ (−0.586) (0.253) (−0.125) (−2.142)∗ ∗ (−0.805) (2.093)∗ ∗ (−2.432)∗ ∗ (−0.404)
Religion Yes Yes Yes Yes Yes Yes Yes Yes Yes
Dummies
Game FE Yes Yes Yes Yes Yes Yes Yes Yes Yes
Session FE Yes Yes Yes Yes Yes Yes Yes Yes Yes
Obs 4250 4250 4250 4250 4250 4250 4250 4250 4250
Adj. R2 0.088 0.078 0.093 0.099 0.083 0.100 0.080 0.072 0.082
F-stats 16.837 14.753 17.085 19.046 15.752 18.402 16.296 14.839 16.177
P-value 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
(F-stat)
This table presents panel least squares regression results of how Uncertainty Avoidance and Masculinity impact trading behaviour. All variables are defined in
Appendix A1. Standard errors are clustered by country. T-statistics are presented in parentheses. ∗ ∗ ∗ , ∗ ∗ and ∗ denote statistical significance at the 1%, 5% and 10%
levels, respectively.
 G. Tan, C.S. Cheong and R. Zurbruegg / Journal of Banking and Finance 106 (2019) 357–370 363

Table 4
The impact of positive and negative framing.

Positive Framing Negative Framing

Dependant Variable Trade Size Trade Frequency Trade Volume Trade Size Trade Frequency Trade Volume

(1) (2) (3) (4) (5) (6)

Uncertainty −0.074 −0.114 −0.893 −0.057 −0.103 −0.648

Avoidance (−7.140)∗ ∗ ∗ (−8.412)∗ ∗ ∗ (−7.539)∗ ∗ ∗ (−8.551)∗ ∗ ∗ (−5.387)∗ ∗ ∗ (−3.639)∗ ∗ ∗
Masculinity 0.064 0.046 0.827 0.058 0.007 0.652
(3.591)∗ ∗ ∗ (2.647)∗ ∗ ∗ (4.979)∗ ∗ ∗ (2.883)∗ ∗ ∗ (0.381) (2.785)∗ ∗ ∗
Controls Yes Yes Yes Yes Yes Yes
Game FE Yes Yes Yes Yes Yes Yes
Session FE Yes Yes Yes Yes Yes Yes
Obs 2125 2125 2125 2125 2125 2125
Adj. R2 0.118 0.103 0.100 0.070 0.095 0.065
F-stats 12.337 10.706 11.270 7.421 9.934 7.424
P-value (F-stat) 0.000 0.000 0.000 0.000 0.000 0.000

This table presents the panel regression results of the impact that Uncertainty Avoidance and Masculinity has on trading behaviour
when rewards for trading are framed in terms of gains (Games 1 and 3) and losses (Games 2 and 4). All variables are defined
in Appendix A1. Standard errors are clustered by country. T-statistics are presented in parentheses. ∗ ∗ ∗ , ∗ ∗ and ∗ denote statistical
significance at the 1%, 5% and 10% levels, respectively.

dimensions. Nevertheless, their economic significance is still main-
tained. For example, a one standard deviation increase in Uncer-
tainty avoidance is associated with a 26.0% (approximately 13 con-
tracts) reduction in total Trade Volume. Trade Size declines by 15.6%
and Trade Frequency falls by 29.3%. The impact of Masculinity on
trading behavior is also economically significant, albeit smaller. A
one standard deviation increase is related to a 13.6% (7 contracts)
incremental rise in total Trade Volume, a 7.9% increase in Trade Size
and a 3.8% rise in Trade Frequency.
Taken together, the above results show that the impact of Un-
certainty avoidance and Masculinity on trading behavior corroborate
our initial univariate findings. Both cultural dimensions contribute
to explaining the trading behavior of individuals and support our
hypotheses.
4.3. Accounting for framing and endowment effects
A person’s willingness to take risk can be influenced by how
a situation is framed (Tversky and Kahneman, 1981; Weber et al.,
20 0 0). We therefore proceed to test the role of Uncertainty avoid-
ance and Masculinity as predictors for risk taking in trading when
accounting for framing effects. While we include game effects in
our previous regressions, they do not explicitly show how sensitive
each of the explanatory variables is when marks are to be earned
(Games 1 and 3) or lost (Games 2 and 4). We therefore re-run our
panel regression results when we sub-sample the data between
the positive framing of Games 1 and 3 and the negative framing
of Games 2 and 4. Table 4 shows the results for Uncertainty avoid-
ance and Masculinity when the regressions are run using these two
sub-samples and reveals that in both situations the results remain
qualitatively unchanged. The only notable difference is that Mas-
culinity is no longer significant in explaining Trade Frequency for
the negatively framed games.
We next examine the potential impact of an endowment effect.
We sort all trades of a session based on whether the trader goes
into the trading session with either a positive or negative balance.
No matter which game a trader is playing, their overall trading ac-
count must show a profit in order to earn marks. Therefore, if a
trader’s account is in negative territory going into the next session
of a game, there is added pressure to perform. On the other hand,
traders that are already sitting on a profit from a previous session
will likely be less reluctant to trade. As such, the desire to trade
will be different between those traders that have a positive trad-
ing balance relative to those with a negative balance.
To test for the impact that Uncertainty avoidance and Masculinity
have on the above two situations the first three columns of Table 5
show regression results when traders enter a session with a posi-
tive trading balance, whereas the last three columns show results
for when traders start a session with a negative balance. These re-
sults reveal that while there is no tangible difference in the sig-
nificance of Uncertainty avoidance across traders that have either a
profit or a loss in their trading account going into a new session,
the influence of Masculinity is reduced to only significantly impact-
ing Trading Volume, at the 5% level, when traders start with a loss.
We consider two primary reasons, which are not necessar-
ily mutually exclusive of one another, for why Masculinity has a
weaker effect on trading activity when traders start a new session
with a deficit in their trading account. Both relate to the role that
Masculinity plays in capturing societal inclinations to be overconfi-
dent. First, traders who still take risks when they should be mod-
erating their trading behavior (i.e. they already have a profit go-
ing into a session and therefore have already scored some credit)
are likely to do so because they have a greater self-attribution bias
than other traders. This bias, however, may not be noticeable when
we sample only those traders who are in a losing position, be-
cause everyone will have an incentive to continue trading in the
hope of finishing with a profit in their trading account. It would be
harder to pick the role that Masculinity would have in a situation
such as this given all traders are incentivized to continue trading.
Second, if a trader finds themselves starting a new trading session
not having previously done well (i.e. their trading balance is neg-
ative) then it is likely that their previous confidence in their own
skills and ability to perform may be diminished. In other words,
any overconfidence that a trader may have started with can dissi-
pate and therefore Masculinity will no longer be significant when
traders start a new session in a losing position.
To examine the validity of the above explanations we further
sub-sample our data and produce the results from the subsequent
analysis in Table 6. The first sub-sample consists of examining
traders who have nothing to gain from continuing to trade, and the
second consists of focusing on traders who have nothing to lose.
In the first case, we classify a trader as having ‘nothing to gain’ if
they have already obtained full marks for the game that they are
playing, implying that any further trades that they make will be
purely recreational.3 In fact, despite not being able to earn more
3
We classify a trader as having ‘nothing to gain’ as someone who is playing
Games 1 or 2 and has executed the minimum 4 trades required in a Game and
holds a profit in their trading account. Likewise, traders that are playing Games 3
364 G. Tan, C.S. Cheong and R. Zurbruegg / Journal of Banking and Finance 106 (2019) 357–370

Table 5
The impact of positive and negative trading balances.

Positive Trading Balance Negative Trading Balance

Dependant Variable Trade Size Trade Frequency Trade Volume Trade Size Trade Frequency Trade Volume

(1) (2) (3) (4) (5) (6)

Uncertainty −0.050 −0.097 −0.494 −0.078 −0.069 −0.705

Avoidance (−4.091)∗ ∗ ∗ (−7.016)∗ ∗ ∗ (−2.628)∗ ∗ ∗ (−7.583)∗ ∗ ∗ (−4.289)∗ ∗ ∗ (−5.019)∗ ∗ ∗
Masculinity 0.083 0.033 1.237 0.041 0.033 0.445
(4.626)∗ ∗ ∗ (2.081)∗ ∗ (4.724)∗ ∗ ∗ (1.624) (1.259) (2.045)∗ ∗
Controls Yes Yes Yes Yes Yes Yes
Game FE Yes Yes Yes Yes Yes Yes
Session FE Yes Yes Yes Yes Yes Yes
Obs 2121 2121 2121 1159 1159 1159
Adj. R2 0.104 0.117 0.110 0.120 0.104 0.084
F-stats 10.460 11.778 11.962 7.061 6.149 5.435
P-value (F-stat) 0.000 0.000 0.000 0.000 0.000 0.000

This table presents the panel regression results of the impact that Uncertainty Avoidance and Masculinity has on trading behaviour
when traders start a new session with a positive or negative trading balance. Session 1 of each game is excluded from the panel
regressions. Standard errors are clustered by country. T-statistics are presented in parentheses. ∗ ∗ ∗ , ∗ ∗ and ∗ denote statistical sig-
nificance at the 1%, 5% and 10% levels, respectively.

marks, they expose themselves to potentially losing points if the
resulting trades do not go well for them. These traders are there-
fore taking risks for no apparent rewards. The first three columns
of Table 6 present the results for what we label ‘nothing to gain’
trades. The results show that both Uncertainty avoidance and Mas-
culinity continue to be significant, and hold their predicted signs,
in determining who is more likely to continue trading. Importantly,
we notice that where cultural inclinations would lead to a person
being overconfident in their ability, as proxied by Masculinity, they
are more likely to continue trading even when there is no tangible
benefit to do so.
‘Nothing to lose’ traders are those who are playing their last
sessions of a game and are sitting on zero points.4 These individ-
uals have nothing to lose by taking greater risks in order to end
up with a potential profit at the end of the session. The results
from sub-sampling in this fashion are tabulated in Columns (4) to
(6) of Table 6 and reveal that Masculinity is no longer significant.
This reinforces our previous results in Table 5, indicating that prior
performance has a substantial bearing on whether Masculinity will
play a role in determining trading activity.
The last six columns of Table 6 reaffirms this proposition. Here
we split traders between those that have won the last session that
they played against those that lost their last session, regardless of
whether their total trading balance is positive or negative and re-
gardless of which game they are playing. If Masculinity is capturing
a societal disposition to be overconfident, then we expect it will
be a significant factor in determining trading activity if the trader
previously won a session, as their recent trading experience will
reinforce their self-attribution bias. Conversely, we would expect a
much weaker effect of Masculinity if the trader has lost the previ-
ous session, and this is what we find. While Masculinity continues
to be significant for traders that are on a winning streak (columns
7 to 9), those traders that have just lost a session reveal that Mas-
culinity is no longer significant (columns 10 to 12).
and 4 and have secured profits in at least two of the previous sessions and are also
sitting on an overall profit will have no incentive to continue trading (other than
the minimum required trades per session).
4 more likely to close their positions earlier.
These consist of individuals in Games 1 and 2 that are playing the last session
and have a loss in their trading account. The same logic applies for the trades we
include from Games 3 and 4. Here traders must ensure they have a profit in at
least two of the trading sessions and we incorporate all trades from individuals
who are in need to generate a profit for a particular session to ensure they pass
this criterion.
4.4. The disposition effect
The disposition effect (Shefrin and Statman, 1985) is a well-
documented trading anomaly relating to investors being more
likely to hold onto losing positions than wining positions, thereby
delaying the realization of losses and bringing forward realized
gains. For the purposes of this paper, we call the time it takes
from when a contract is entered into, to when it is closed Time-
in-Market. Panel A of Table 7 shows a simple univariate analysis
of the Time-in-Market for contracts that close at a profit relative
to those that close at a loss. In keeping with the disposition ef-
fect, both the mean and median Time-in-Market losing contracts
are kept (10.1 min and 4 min, respectively) are significantly longer
than the corresponding times for winning contracts (8.3 min and
2.8 min, respectively).
Panel B shows the regression results for the impact that our
culture measures have on Time-in-Market. These regressions are
performed at the game-level, rather than session-level, as contracts
can extend beyond a single session. Column 1 examines our whole
sample, Column 2 subsamples only those contracts that close in
a winning position, while Column 3 contains only contracts that
close out in a losing position. Normally, taking a longer time to
close a position increases the exposure that a trader has to ongo-
ing market risks, particularly given that we require that all posi-
tions must be closed-out prior to the end of each game. Therefore,
our overall expectation is that where Uncertainty avoidance (Mas-
culinity) is higher (lower), traders are more likely to close-out po-
sitions earlier, which is what column (1) shows. A one standard de-
viation increase in Uncertainty avoidance is associated with a 4.3%
reduction in total Time-in-Market.5 However, Columns 2 and 3 re-
veal that the significance of the culture coefficients is dependent
on whether traders are holding onto a winning or losing posi-
tion. Specifically, we find that only Masculinity influences Time-in-
Market for winning positions, indicating that individuals prone to
a societal inclination towards being overconfident are more likely
to keep these positions open for longer. In contrast, for losing po-
sitions, similar to the results presented in Table 6, Masculinity is
no longer significant. Rather, it is Uncertainty avoidance that mat-
ters. Individuals from societies with high Uncertainty avoidance are
5
This is based on the mean for Time-in-Market being 8.448 min.
 G. Tan, C.S. Cheong and R. Zurbruegg / Journal of Banking and Finance 106 (2019) 357–370
Table 6
The impact of past performance.

Nothing to Gain Nothing to Lose Won Previous Session Lost Previous Session

Dependant Trade Trade Trade Trade Trade Trade Trade Trade

Variable Trade Size Frequency Volume Trade Size Frequency Volume Trade Size Frequency Volume Trade Size Frequency Volume

(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12)

Uncertainty −0.055 −0.093 −0.548 −0.087 −0.018 −0.328 −0.062 −0.095 −0.549 −0.079 −0.074 −0.757
Avoidance (−4.854)∗ ∗ ∗ (−6.584)∗ ∗ ∗ (−2.980)∗ ∗ ∗ (−6.601)∗ ∗ ∗ (−0.760) (−1.710)∗ (−5.172)∗ ∗ ∗ (−5.658)∗ ∗ ∗ (−2.636)∗ ∗ ∗ (−8.686)∗ ∗ ∗ (−4.434)∗ ∗ ∗ (−4.732)∗ ∗ ∗
Masculinity 0.072 0.034 1.015 −0.008 0.024 0.377 0.074 0.042 1.155 0.039 0.017 0.360
(3.741)∗ ∗ ∗ (1.824)∗ (3.873)∗ ∗ ∗ (−0.187) (0.626) (1.542) (4.225)∗ ∗ ∗ (1.802)∗ (4.012)∗ ∗ ∗ (1.567) (0.626) (1.381)
Controls Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Game FE Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Session FE Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
Obs 2099 2099 2099 345 345 345 2005 2005 2005 1080 1080 1080
Adj. R2 0.110 0.101 0.105 0.046 0.070 0.018 0.097 0.111 0.110 0.102 0.089 0.061
F-stats 11.411 10.465 11.686 1.692 2.073 1.284 9.302 10.664 11.268 5.731 5.041 3.936
P-value 0.000 0.000 0.000 0.024 0.003 0.179 0.000 0.000 0.000 0.000 0.000 0.000
(F-stat)
This table presents the panel regression results of the impact that Uncertainty Avoidance and Masculinity have on trading behavior when traders are experiencing four different scenarios: (1) Nothing to
Gain; (2) Nothing to Lose; (3) Won the Previous Session; and (4) Lost the Previous Session. All variables are defined in Appendix A1. Standard errors are clustered by country. T-statistics are presented in
parentheses. ∗ ∗ ∗ , ∗ ∗ and ∗ denote statistical significance at the 1%, 5% and 10% levels, respectively.

365
366 G. Tan, C.S. Cheong and R. Zurbruegg / Journal of Banking and Finance 106 (2019) 357–370

Table 7
Time-in-Market.

Panel A

Profit Transactions Loss Transactions Difference

(1) (2) (1) - (2)

Time-in-Market Mean 8.2824 10.1208 −1.8384∗ ∗ ∗

Median 2.8000 4.0000 −1.2000∗ ∗ ∗

Panel B

Dependant Variable Full Sample Profit Transactions Loss Transactions

Time-in-Market Time-in-Market Time-in-Market
(1) (2) (3)

Uncertainty Avoidance −0.022 −0.001 −0.064

(−2.050)∗ ∗ (−0.114) (−3.950)∗ ∗ ∗
Masculinity 0.059 0.096 0.013
(2.261)∗ ∗ (4.249)∗ ∗ ∗ −0.351
Controls Yes Yes Yes
Game FE Yes Yes Yes
Obs 833 831 796
Adj. R2 0.091 0.174 0.07
F-stats 4.633 8.618 3.602
P-value (F-stat) 0.000 0.000 0.000

This table presents both univariate and panel regression results of the impact that Uncertainty Avoidance and Masculinity has on the length of time it takes for an
individual to close-out an open position (Time-in-Market). Panel A examines the univariate relationship between Time-in-Market and profit/loss transactions. We
perform t-tests (Wilcoxon/Mann-Whitney tests) to compare the means (medians) of each trading measure between the sub-sample of profitable transactions
and losing transactions. Panel B presents the panel regression results conducted at the game-level. All variables are defined in Appendix A1. Standard errors
are clustered by country. T-statistics are presented in parentheses. ∗ ∗ ∗ , ∗ ∗ and ∗ denote statistical significance at the 1%, 5% and 10% levels, respectively.

4.5. Market versus limit orders and Distance-from-Market
Our final analysis focuses on a measure we call Distance-from-
Market. It is calculated as the difference, measured in ticks, be-
tween a trader’s order price and the prevailing market price at the
time the order is placed for all subsequently executed orders. A
case can be argued for it to have either a positive or negative rela-
tionship with risk-taking. For example, placing orders further away
from the market can increase the risk of the order not being ex-
ecuted. However, at the same time, it limits the risks of purchas-
ing/selling the asset at an unfavorable price if the market heads in
a different direction. In other words, limit orders that are placed
further away from the market price will curtail the risk of pur-
chasing the asset at an unfavorable price relative to market or-
ders. We take this view as our a priori expectation, implying that
the shorter the Distance-from-Market, the greater exposure there is
to market risks. For our cultural dimension measures this implies
that individuals from a cultural background with a lower (higher)
Uncertainty avoidance (Masculinity) are more likely to place orders
closer to the market price. Likewise, we would expect more limit
orders to be placed, relative to market orders, by individuals from
societies with a higher (lower) Uncertainty avoidance (Masculinity)
score.
Table 8 shows six regression results. The first three columns
are panel OLS regressions showing the impact that our two cul-
ture measures have on their own, and then jointly, on Distance-
from-Market. The last three columns are panel probit regressions
where the dependent variable is a dummy variable that is equal to
one if the initiated transaction was a market order and zero oth-
erwise. The results show that while individually, both Uncertainty
avoidance and Masculinity are significant determinants, only Uncer-
tainty avoidance remains significant when both measures are em-
ployed within the same regressions. To provide some economic in-
terpretation to these results, the coefficient of 0.009 for Uncertainty
avoidance in column (3) implies that, on average, a one standard
deviation change in Uncertainty avoidance leads to a 17.4% increase
in ticks in Distance-from-Market.6 Columns (4) to (6) tell a similar
6
Based on the mean Distance-from-Market being 0.8509.
story, with individuals from higher Uncertainty avoidance societies
significantly less likely to utilize market orders.
5. Additional robustness tests
5.1. Equally-weighted country observations
While we capture observations from individuals that come from
21 different countries and territories, the sample is not evenly dis-
persed across these societies. While participants from China and
Australia contribute to a bit under 20% each, countries such as
Brazil, Singapore and South Korea count for approximately 1% each.
To ensure our results are not solely driven by the disproportionate
weightings of the larger countries, Table 9 reports the results from
weighted least squares regressions where weightings are assigned
to each observation such that the total weighting of observations
for any one country is identical. The table reveals that, overall, the
results remain consistent with our baseline results presented in
Table 3. The main difference is that Masculinity is no longer sig-
nificant in influencing Trade Frequency (columns 5 and 6).
5.2. Using Hofstede dimensions at the individual level
While we lack a large enough sample of observations from each
country to construct Uncertainty avoidance and Masculinity scores
of our own (see Rieger et al., 2015; Wang et al., 2017), we never-
theless perform a simple test to ensure our results hold when con-
trolling for how individuals in our sample answer the Hofstede sur-
vey questions for Uncertainty avoidance and Masculinity. In Table 10
we include the raw scores from those students that completed the
individual Masculinity and Uncertainty avoidance questions as ad-
ditional control variables. The results show no qualitative change
from including these additional variables in the regressions. The
main difference being that Uncertainty avoidance is no longer sig-
nificant in determining Trade Frequency.
5.3. Alternative measures for culture
The final test we present is to see if our prior findings hold
up when using alternatives to Hofstede’s measures. We employ
 G. Tan, C.S. Cheong and R. Zurbruegg / Journal of Banking and Finance 106 (2019) 357–370 367

Table 8
Distance-from-Market.

Regression Method Panel Panel Panel Probit Probit Probit

Dependant Variable Distance-from-Market Distance-from-Market Distance-from-Market Marketorder Marketorder Marketorder

(1) (2) (3) (4) (5) (6)

Uncertainty 0.008 0.009 −0.007 −0.007

Avoidance (5.430)∗ ∗ ∗ (5.479)∗ ∗ ∗ (−4.040)∗ ∗ ∗ (−3.151)∗ ∗ ∗
Masculinity −0.005 0.002 0.008 0.002
(−2.723)∗ ∗ ∗ (1.004) (2.626)∗ ∗ ∗ (0.696)
Controls Yes Yes Yes Yes Yes Yes
Game FE Yes Yes Yes Yes Yes Yes
Session FE Yes Yes Yes Yes Yes Yes
Obs 3837 3837 3837 3836 3836 3836
Adj. R2 / McFadden R2 0.066 0.055 0.066 0.028 0.026 0.028
F-stats / LR-stats 11.434 9.566 11.042 148.162 138.658 148.646
P-value (F-stat) / P-value (LR-stat) 0.000 0.000 0.000 0.000 0.000 0.000

This table presents both panel and probit regression results of the impact that Uncertainty Avoidance and Masculinity has on the distance between the order price
and prevailing market price (Distance-from-Market) for all executed orders. Marketorder is a dummy variable that is equal to one when the trader places a market
order and zero otherwise. All variables are defined in Appendix A1. Standard errors are clustered by country. T-statistics are presented in parentheses. ∗ ∗ ∗ , ∗ ∗ and ∗
denote statistical significance at the 1%, 5% and 10% levels, respectively.

Table 9
Equal country weighting.

Dependant Variable (1) (2) (3) (4) (5) (6) (7) (8) (9)
Trade Trade Trade Trade Trade Trade Trade Trade Trade
Size Size Size Frequency Frequency Frequency Volume Volume Volume

Uncertainty −0.067∗ ∗ ∗ −0.059∗ ∗ ∗ −0.069∗ ∗ ∗ −0.072∗ ∗ ∗ −0.947∗ ∗ ∗ −0.880∗ ∗ ∗

Avoidance (−10.739) (−8.852) (−5.501) (−5.539) (−7.895) (−6.636)
Masculinity 0.102∗ ∗ ∗ 0.068∗ ∗ ∗ 0.018 −0.024 1.025∗ ∗ ∗ 0.517∗ ∗ ∗
(5.924) (3.821) (1.086) (−1.400) (6.046) (2.651)
Controls Yes Yes Yes Yes Yes Yes Yes Yes Yes
Game FE Yes Yes Yes Yes Yes Yes Yes Yes Yes
Session FE Yes Yes Yes Yes Yes Yes Yes Yes Yes
Obs 4250 4250 4250 4250 4250 4250 4250 4250 4250
Adj. R2 0.137 0.123 0.144 0.167 0.149 0.167 0.123 0.100 0.124
F-stats 18.758 12.787 18.989 19.696 19.030 19.661 16.192 15.638 17.083
P-value (F-stat) 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000

This table presents weighted least squares regression results of how Uncertainty Avoidance and Masculinity scores impact their trading behaviour. All countries receive
an equal weight in the regression analysis. All variables are defined in Appendix A1. Standard errors are clustered by country. T-statistics are presented in parentheses.
∗∗∗ ∗∗
, and ∗ denote statistical significance at the 1%, 5% and 10% levels, respectively.

Table 10 movement (Eun et al., 2015). They provide alternative frameworks

Adding individual uncertainty avoidance and individual masculinity.
to using the more popular Hofstede measures. They are also con-
Dependant Variable Trade Size Trade Frequency Trade Volume structed differently from Uncertainty avoidance and Masculinity, al-
(1) (2) (3)
lowing us to check that the results we have generated so far are
not specific to the type of measure we use to proxy for culture.
Uncertainty Avoidance −0.130 −0.004 −0.391
The GLOBE study examines culture, as an artefact of practices
(−9.899)∗ ∗ ∗ (−0.207) (−2.527)∗ ∗
Individual Uncertainty −0.015 −0.005 −0.107 and values, across 62 societies, with the main proposition being
Avoidance (−10.286)∗ ∗ ∗ (−1.638) (−4.387)∗ ∗ ∗ that characteristics differentiating one culture from another are
Masculinity 0.043 0.037 0.900 predictive of organizational processes and individual behavior in
(2.063)∗ ∗ (2.334)∗ ∗ (6.163)∗ ∗ ∗ that culture (House et al., 2004). We employ the GLOBE study’s
Individual Masculinity 0.003 0.002 0.081
(0.855) (0.449) (2.050)∗ ∗
Assertiveness dimension, which measures the degree to which in-
Controls Yes Yes Yes dividuals are assertive, confrontational, and aggressive in their re-
Game FE Yes Yes Yes lationship with others, as this interpretation closely matches the
Session FE Yes Yes Yes spirit of the Masculinity dimension of Hofstede (1980). We code
Obs 920 920 920
the Assertiveness score for each individual within our sample such
Adj. R2 0.200 0.142 0.137
F-stats 9.520 6.874 6.387 that higher scores imply more assertive participants. Our results in
P-value (F-stat) 0.000 0.000 0.000 Table 11 show Assertiveness is associated with higher risk-taking,
evident in higher Trade Size, Trade Frequency, and Trade Volume,
This table presents panel least squares regression results when adding Individual
Uncertainty Avoidance and Individual Masculinity as additional controls. All variables which all are significant at the 1% level. The results are also eco-
are defined in Appendix A1. Standard errors are clustered by country. T-statistics nomically significant. For example, a one standard deviation rise in
are presented in parentheses. ∗ ∗ ∗ , ∗ ∗ and ∗ denote statistical significance at the 1%, Assertiveness (σ = 0.829) is estimated to result in a 25.5% increase
5% and 10% levels, respectively. in Trade Volume.
Using data from thirty-three nations, Gelfand et al. (2011) study
the differences between tight and loose culture and theorize that
the GLOBE Assertiveness culture measure (House et al., 2004) and tightness and looseness materialize as a reference-shift cumulative
the Cultural Looseness measure of Gelfand et al. (2011). These mea- build-up where normative attitudes in a given nation are generally
sures have previously been used to examine culture and foreign common among its members. From this study, a tightness scale
direct investments (Tang, 2012), and culture and stock price co-
368 G. Tan, C.S. Cheong and R. Zurbruegg / Journal of Banking and Finance 106 (2019) 357–370

Table 11
Alternative culture measures.

Dependant Variable Trade Size Trade Size Trade Frequency Trade Frequency Trade Volume Trade Volume

Assertiveness 1.637 1.531 14.955

(16.898)∗ ∗ ∗ (8.874)∗ ∗ ∗ (8.826)∗ ∗ ∗
Cultural 0.112 0.503 4.237
Looseness (1.349) (3.920)∗ ∗ ∗ (2.909)∗ ∗ ∗
Controls Yes Yes Yes Yes Yes Yes
Game FE Yes Yes Yes Yes Yes Yes
Session FE Yes Yes Yes Yes Yes Yes
Obs 4250 4070 4250 4070 4250 4070
Adj. R2 0.074 0.060 0.080 0.077 0.063 0.055
F-stats 14.044 11.434 15.231 14.513 12.940 10.841
P-value (F-stat) 0.000 0.000 0.000 0.000 0.000 0.000

This table presents two alternative measures to capture culture in the regressions. The Assertiveness measure is taken from
House et al. (2004) and it measures the degree to which individuals are assertive, confrontational, and aggressive in their re-
lationship with others. The Cultural Looseness measure is taken from Gelfand et al. (2011) and measures the extent to which a
country has strong norms and low tolerance of deviant behaviour. All variables are defined in Appendix A1. Standard errors are
clustered by country. T-statistics are presented in parentheses. ∗ ∗ ∗ , ∗ ∗ and ∗ denote statistical significance at the 1%, 5% and 10%
levels, respectively.

is developed for the thirty-three nations. The Cultural Looseness
score captures the extent to which a country has strong norms and
is tolerant of deviant behavior. The lower (higher) the score, the
more tight (loose) the society is. Gelfand found that a history of
threats such as natural disasters is associated with greater tight-
ness. Meanwhile, exposure to natural disasters has in turn been
found to be associated with risk-taking (Bernile et al., 2017). We
therefore use Gelfand’s Cultural Looseness as a measure that can
affect risk-taking in trading.
The results in Table 11 show that Cultural Looseness is positively
related to risk taking in trading, with all coefficients, except for
Trade Size, being positive and significant at the 1% level. As an ex-
ample of the economic significance behind the results, a one stan-
dard deviation rise in Cultural Looseness (σ = 2.753) leads to an es-
timated 24.0% rise in Trade Volume.
The internet appendix also contains results from using Hofst-
ede’s Individualism scores. As a measure that has been previously
utilized in the literature to influence financial market behavior
(Chui et al., 2010; Eun et al., 2015), it captures whether people in
a particular culture are more likely to view themselves as being an
independent versus interdependent construct. Chui et al. (2010) ar-
gue that the level of Individualism prevalent within a culture also
captures the level of overoptimism / overconfidence individuals
are likely to display. Our results show that while Individualism,
on its own, has a significant relationship with two of the trad-
ing activity measures, it becomes insignificant when we add both
Uncertainty Avoidance and Masculinity as independent variables.
Therefore, for our particular dataset its contribution is limited in
the presence of the two culture measures we focus on in this
paper.
6. Conclusion
communal element, yet is present in an individual’s conduct. We
thus expect cultural differences to affect an individual’s trading
decisions in the financial markets, resulting in differences in how
they trade. The extant research shows that personal traits can af-
fect an individual’s trading activity (Barber and Odean, 20 0 0, 20 01;
Graham et al., 2009), but not specifically in relation to the impact
that culture can have. This is despite the wealth of literature that
shows culture impacts financial decision making. Therefore, our
contribution is to provide direct evidence of the impact culture can
have on trading behavior.
Consistent with expectations, our proxies for measuring the
general level of risk aversion and overconfidence present within a
culture, as captured through Hofstede’s (1980, 2001) cultural mea-
sures of Uncertainty Avoidance and Masculinity, are significantly as-
sociated with differences in trading behavior linked to risk-taking.
Specifically, we find that individuals whose cultural background
encourages greater risk-taking are more likely to exhibit greater
trading activity, as measured through total trading volume, trad-
ing frequency and trade size. Additionally, the impact of culture on
trading behavior is robust to framing effects (Tversky and Kahne-
man, 1981).
Our study provides a bridge between the macro-level analysis
that the extant literature covers in examining how culture affects
aggregate stock behavior (Chui et al., 2010; Eun et al., 2015), and
how culture affects individual risk-taking, by showing the impact
it has on the trading behavior of individuals. In doing so, we show
the building blocks that can explain how trading activity may dif-
fer across countries by affecting the proclivity to trade more or less
frequently, and by influencing the willingness of traders to place
orders close to market prices as well as how long positions are
kept open, thereby contributing to the differences in liquidity pro-
vision and volatility across markets.

Hofstede (1991) contends that culture is the “software of the Conflict of interest
mind”, drawing attention to the influence of culture in understand-
ing human conduct. Central to this is the notion that culture is a None.
 G. Tan, C.S. Cheong and R. Zurbruegg / Journal of Banking and Finance 106 (2019) 357–370 369

Appendix A1
Variable Definitions.

Variable list Definition

Trading variables
- Distance-from-Market The distance, measured in ticks, of the price orders are placed at relative to the prevailing market price for orders
that are subsequently executed. Measured per individual per session.
- Time-in-Market The length of time it takes for an individual to close-out an open position, expressed in minutes and seconds.
- Trade Size The average size of executed orders of an individual per trading session, expressed in the number of futures
contracts.
- Trade Frequency The number of executed orders per session for the individual.
- Trade Volume The trading volume of an individual per trading session, expressed in the number of futures contracts.
National Culture variables
- Assertiveness The value for each individual is derived from House et al. (2004) and is based on an individual’s country of
residence during their childhood. The country score measures the degree to which individuals are likely to be
assertive, confrontational, and aggressive in their relationship with others.
- Cultural Looseness This measure is taken from Gelfand et al. (2011) and is based on an individual’s country of residence during their
childhood. The country score captures the extent to which that society has strong norms and low tolerance of
deviant behaviour. The higher the score, the greater the tolerance.
- Masculinity The assignment of an individual’s Masculinity versus Femininity cultural dimension (Hofstede, 1980, 2001) is based
on an individual’s country of residence during their childhood. The individual country score expresses the degree
to which people focus on achievement in a largely competitive society.
- Uncertainty Avoidance The assignment of an individual’s Uncertainty Avoidance Index (Hofstede, 1980, 2001) is based on an individual’s
country of residence during their childhood. The individual country score reflects the extent of discomfort
members of the society have towards uncertainty and ambiguity.
Control variables
- Digit A dummy variable equal to one if an individual’s ring finger is longer than their index finger, and zero otherwise.
- Eldest A dummy variable equal to one if an individual is the eldest child in the family, and zero otherwise.
- Experience The number of years of trading experience an individual has.
- Female A dummy variable equal to one if the individual is a female, and zero otherwise.
- Major loss A count of perceived major financial losses (e.g. loss of business) and/or personal loss (e.g. death) events in the
family experienced by an individual during their childhood.
- Session Market Return Closing price of the session minus opening price divided by the opening price x100
- Session Market Risk Calculated from multiplying the root of ten by the standard deviation of 30-second market returns (there are ten
30-seconds in each session).
- Profit The dollar profit/loss of a trader’s trading account at the beginning of the session.
- Religion A set of dummy variables to capture the dominant religion in each country. These include Catholic, Protestant,
Muslim, Buddhist, and Other (baseline).
- Risk Profile The financial risk domain-specific measure of an individual trader following Bapna et al. (2010) using the DOSPERT
survey (Weber et al., 2002).
- Stimulating Risk The average score of ten survey questions designed by Zaleskiewicz (2001).
- Instrumental Risk The average score of seven survey questions designed by Zaleskiewicz (2001).
- LogGDPcap The logarithm of the gross domestic product per capita for each country.
- Marketcap The average market capitalization of equity market divided by gross domestic product.

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