American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Traders' Expectations in Asset Markets: Experimental Evidence
American Economic Review
vol. 97,
no. 5, December 2007
(pp. 1901–1920)
Abstract
We elicit traders' predictions of future price trajectories in repeated experimental markets for a 15-period-lived asset. We find that individuals' beliefs about prices are adaptive, and primarily based on past trends in the current and previous markets in which they have participated. Most traders do not anticipate market downturns the first time they participate in a market, and, when experienced, they typically overestimate the time remaining before market peaks and downturns occur. When prices deviate from fundamental values, belief data are informative to an observer in predicting the direction of future price movements and the timing of market peaks. (JEL C91, D12, D84, G11 )Citation
Haruvy, Ernan, Yaron Lahav, and Charles N. Noussair. 2007. "Traders' Expectations in Asset Markets: Experimental Evidence." American Economic Review, 97 (5): 1901–1920. DOI: 10.1257/aer.97.5.1901Additional Materials
JEL Classification
- C91 Design of Experiments: Laboratory, Individual
- D12 Consumer Economics: Empirical Analysis
- D84 Expectations; Speculations
- G11 Portfolio Choice; Investment Decisions