Download or read book Expectations Structure in Asset Pricing Experiments written by and published by . This book was released on 2003 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Notwithstanding the recognized importance of traders & rsquo; expectations in characterizing the observed market dynamics, for instance the formation of speculative bubbles and crashes on financial markets, little attention has been devoted so far by economists to a rigorous study of expectation formation in the laboratory. In this work we describe a laboratory experiment on the emergence and coordination of expectations in a pure exchange framework. We largely base our study on previous experiments on expectation formation in a controlled laboratory environment by Cars Hommes, Joep Sonnemans, Ian Tuinstra and Henk van de Velden (2002a). We consider a simple two asset economy with a riskless bond and a risky stock. Each market is composed of six experimental subjects who act as financial advisors of myopic risk-averse utility maximizing investors and are rewarded according to how well their forecasts perform in the market. The participants are asked to predict not only the price of the risky asset at time t+1, as in Hommes et al. (2002a), but also the confidence interval of their prediction, knowing the past realizations of the price until time t ¡ 1. The realized asset price is derived from a Walrasian market equilibrium equation, unknown to the subjects, with feedback from individual forecasts. Subjects & rsquo; earnings are proportional to the increase in their wealth level. With respect to previous experiments that did not include an explicit evaluation of risk by participants, we observe a higher price volatility, a decreased likelihood of bubble dynamics and, in general, a higher heterogeneity of predictions. -- experimental economics ; expectations ; coordination ; asset pricing
Download or read book Coordination of Expectations in Asset Pricing Experiments written by Cars H. Hommes and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate expectation formation in a controlled experimental environment. Subjects are asked to predict the price in a standard asset pricing model. They do not have knowledge of the underlying market equilibrium equations, but they know all past realized prices and their own predictions. Aggregate demand for the risky asset depends upon the forecasts of the participants. The realized price is then obtained from market equilibrium with feedback from six individual expectations. Realized prices differ significantly from fundamental values and typically exhibit oscillations around, or slow convergence to, this fundamental. In all groups participants coordinate on a common prediction strategy.
Download or read book Coordination of Expectations in Asset Pricing Experiments written by Cars Hommes and published by . This book was released on 2003 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Expectation formation in dynamic market experiments written by Peter Heemeijer and published by Rozenberg Publishers. This book was released on 2009 with total page 308 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Behavioral Rationality and Heterogeneous Expectations in Complex Economic Systems written by Cars Hommes and published by Cambridge University Press. This book was released on 2013-01-24 with total page 273 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recognising that the economy is a complex system with boundedly rational interacting agents, applies complexity modelling to economics and finance.
Download or read book Coordination of Expectations in Asset Pricing Experiments written by and published by . This book was released on 2004 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Nonlinear Dynamics and Heterogeneous Interacting Agents written by Thomas Lux and published by Springer Science & Business Media. This book was released on 2006-06-06 with total page 326 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economic application of nonlinear dynamics, microscopic agent-based modelling, and the use of artificial intelligence techniques as learning devices of boundedly rational actors are among the most exciting interdisciplinary ventures of economic theory over the past decade. This volume provides us with a most fascinating series of examples on "complexity in action" exemplifying the scope and explanatory power of these innovative approaches.
Download or read book Uncertainty Expectations and Asset Price Dynamics written by Fredj Jawadi and published by Springer. This book was released on 2018-11-30 with total page 192 pages. Available in PDF, EPUB and Kindle. Book excerpt: Written in honor of Emeritus Professor Georges Prat (University of Paris Nanterre, France), this book includes contributions from eminent authors on a range of topics that are of interest to researchers and graduates, as well as investors and portfolio managers. The topics discussed include the effects of information and transaction costs on informational and allocative market efficiency, bubbles and stock price dynamics, paradox of rational expectations and the principle of limited information, uncertainty and expectation hypotheses, oil price dynamics, and nonlinearity in asset price dynamics.
Download or read book Rational Expectations and the Capital Asset Pricing Model written by Robert K. Rayner and published by . This book was released on 1985 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Experiments in Macroeconomics written by John Duffy and published by Emerald Group Publishing. This book was released on 2014-11-14 with total page 300 pages. Available in PDF, EPUB and Kindle. Book excerpt: Volume 17 entitled 'Experiments in Macroeconomics', of the Research in Experimental Economics Book Series is the first-ever collection by leading researchers in the field of laboratory studies aimed at understanding macroeconomic phenomena.
Download or read book Does Volatility Matter written by Giulio Bottazzi and published by . This book was released on 2009 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: We present results of an experiment on expectation formation in an asset market. Participants to our experiment must provide forecasts of the stock future return to computerized utility-maximizing investors, and are rewarded according to how well their forecasts perform in the market. In the Baseline treatment participants must forecast the stock return one period ahead; in the Volatility treatment, we also elicit subjective confidence intervals of forecasts, which we take as a measure of perceived volatility. The realized asset price is derived from a Walrasian market equilibrium equation with non-linear feedback from individual forecasts. Our experimental markets exhibit high volatility, fat tails and other properties typical of real financial data. Eliciting confidence intervals for predictions has the effect of reducing price fluctuations and increasing subjects’ coordination on a common prediction strategy. -- Experimental economics ; Expectations ; Coordination ; Volatility ; Asset pricing
Download or read book Learning and Expectations in Macroeconomics written by George W. Evans and published by Princeton University Press. This book was released on 2012-01-06 with total page 440 pages. Available in PDF, EPUB and Kindle. Book excerpt: A crucial challenge for economists is figuring out how people interpret the world and form expectations that will likely influence their economic activity. Inflation, asset prices, exchange rates, investment, and consumption are just some of the economic variables that are largely explained by expectations. Here George Evans and Seppo Honkapohja bring new explanatory power to a variety of expectation formation models by focusing on the learning factor. Whereas the rational expectations paradigm offers the prevailing method to determining expectations, it assumes very theoretical knowledge on the part of economic actors. Evans and Honkapohja contribute to a growing body of research positing that households and firms learn by making forecasts using observed data, updating their forecast rules over time in response to errors. This book is the first systematic development of the new statistical learning approach. Depending on the particular economic structure, the economy may converge to a standard rational-expectations or a "rational bubble" solution, or exhibit persistent learning dynamics. The learning approach also provides tools to assess the importance of new models with expectational indeterminacy, in which expectations are an independent cause of macroeconomic fluctuations. Moreover, learning dynamics provide a theory for the evolution of expectations and selection between alternative equilibria, with implications for business cycles, asset price volatility, and policy. This book provides an authoritative treatment of this emerging field, developing the analytical techniques in detail and using them to synthesize and extend existing research.
Download or read book Handbook of Financial Markets Dynamics and Evolution written by Thorsten Hens and published by Elsevier. This book was released on 2009-06-12 with total page 607 pages. Available in PDF, EPUB and Kindle. Book excerpt: The models of portfolio selection and asset price dynamics in this volume seek to explain the market dynamics of asset prices. Presenting a range of analytical, empirical, and numerical techniques as well as several different modeling approaches, the authors depict the state of debate on the market selection hypothesis. By explicitly assuming the heterogeneity of investors, they present models that are descriptive and normative as well, making the volume useful for both finance theorists and financial practitioners. Explains the market dynamics of asset prices, offering insights about asset management approaches Assumes a heterogeneity of investors that yields descriptive and normative models of portfolio selections and asset pricing dynamics
Download or read book Higher Order Expectations in Asset Pricing written by Philippe Bacchetta and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Coordination of Expectation in Asset Pricing Experiments written by Cars Hommes and published by . This book was released on 2004 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book A Behavioral Approach to Asset Pricing written by Hersh Shefrin and published by Elsevier. This book was released on 2008-05-19 with total page 636 pages. Available in PDF, EPUB and Kindle. Book excerpt: Behavioral finance is the study of how psychology affects financial decision making and financial markets. It is increasingly becoming the common way of understanding investor behavior and stock market activity. Incorporating the latest research and theory, Shefrin offers both a strong theory and efficient empirical tools that address derivatives, fixed income securities, mean-variance efficient portfolios, and the market portfolio. The book provides a series of examples to illustrate the theory. The second edition continues the tradition of the first edition by being the one and only book to focus completely on how behavioral finance principles affect asset pricing, now with its theory deepened and enriched by a plethora of research since the first edition
Download or read book Empirical Asset Pricing written by Wayne Ferson and published by MIT Press. This book was released on 2019-03-12 with total page 497 pages. Available in PDF, EPUB and Kindle. Book excerpt: An introduction to the theory and methods of empirical asset pricing, integrating classical foundations with recent developments. This book offers a comprehensive advanced introduction to asset pricing, the study of models for the prices and returns of various securities. The focus is empirical, emphasizing how the models relate to the data. The book offers a uniquely integrated treatment, combining classical foundations with more recent developments in the literature and relating some of the material to applications in investment management. It covers the theory of empirical asset pricing, the main empirical methods, and a range of applied topics. The book introduces the theory of empirical asset pricing through three main paradigms: mean variance analysis, stochastic discount factors, and beta pricing models. It describes empirical methods, beginning with the generalized method of moments (GMM) and viewing other methods as special cases of GMM; offers a comprehensive review of fund performance evaluation; and presents selected applied topics, including a substantial chapter on predictability in asset markets that covers predicting the level of returns, volatility and higher moments, and predicting cross-sectional differences in returns. Other chapters cover production-based asset pricing, long-run risk models, the Campbell-Shiller approximation, the debate on covariance versus characteristics, and the relation of volatility to the cross-section of stock returns. An extensive reference section captures the current state of the field. The book is intended for use by graduate students in finance and economics; it can also serve as a reference for professionals.
