Expectations and learning in Iowa

We study the rationality of learning and the biases in expectations in the Iowa Experimental Markets. Using novel tests developed in (Bossaerts, P., 1996. Martingale restrictions on equilibrium security prices under rational expectations and consistent beliefs. Caltech working paper; Bossaerts, P., 1997. The dynamics of equity prices in fallible markets. Caltech working paper), learning in the Iowa winner-take-all markets is found to be in accordance with the rules of conditional probability (Bayes' law). Hence, participants correctly update their beliefs using the available information. There is evidence, however, that beliefs do not satisfy the restrictions of rational expectations that they reflect the factual distribution of outcomes. © 2000 Elsevier Science B.V.


Published in:
Journal of Banking and Finance, 24, 9, 1535-1555
Year:
2000
Keywords:
Note:
University of Illinois, Chicago, IL 60612, United States California Institute of Technology, Div. Hum. Social Sci., m/c 228-77, Pasadena, CA 91125, United States
TY - JOUR
Cited By (since 1996): 3
Export Date: 10 March 2008
Source: Scopus
Other identifiers:
Scopus: 2-s2.0-0040515070
Laboratories:




 Record created 2008-03-12, last modified 2018-03-17


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