Traders’ Expectations in Asset Markets

Traders’ Expectations in Asset Markets -...

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Unformatted text preview: Traders Expectations in Asset Traders Expectations in Asset Markets: Exper imental Evidence Markets: Exper imental Evidence By: Ernan Haruvy, Yaron Lahav, and Charles N. Noussair Presentation by: Andrew Rapapor t The focus of the paper is on traders expectations in repeated experimental markets that exhibit price bubbles and crashes, but eventually converge to fundamental values. We consider the role of expectations in generating the bubbles and crashes, and how expectations react to such price patterns. We first study how expectations form and evolve in response to market data. Secondly we examine whether beliefs are accurate predictors of future price movements. Lastly, we investigate whether observations of traders price expectations can be useful in forecasting future prices and trends. Hypotheses Hypotheses 1. I ndividuals price expectations are a function of price trends within the current market, as well as in prior markets. 2. I ndividuals price expectations are unbiased predictors of future price movements and of the time at which price peaks occur. 3. I nformation on trader expectations provides an observer with additional power to predict price movements and market breaks beyond that from knowing (a) the difference between current price and fundamental value, and (b) the prior price history of the market. Experimental Design and...
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Traders’ Expectations in Asset Markets -...

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