We present a large-group asset pricing experiment with the design of Hommes et al. (2008). Participants are asked to predict the price of a risky asset, whose realization depends on an aggregation of all individual forecasts. The asset markets consist of 21 to 32 participants, a group size larger than in most experiments. Multiple large price bubbles are observed in six out of seven markets. The bubbles emerge even faster and more frequently than in the smaller markets of Hommes et al. (2008). Individual forecast errors do not cancel out at the aggregate level and expectations cannot be called rational in the sense of Muth. The price patterns observed in the experiment can be captured by a behavioral heuristics switching model. Heterogeneity in expectations seems crucial to explain the market dynamics.
PhD Lunch Seminars Amsterdam
- Speaker(s)
- Myrna Hennequin (University of Amsterdam)
- Date
- Tuesday, 26 April 2016
- Location
- Amsterdam