Journal of Financial and Quantitative Analysis Vol. 54 No. 1 2019

Heterogeneity of Beliefs and Trade in Experimental Asset Markets

Tim A. Carlé^1,2; Yaron Lahav^1,2; Tibor Neugebauer^1,2; Charles Noussair^1,2

¹ Ben-Gurion University of the Negev · ² University of Luxembourg

Abstract

We investigate the relationship between traders’ expectations and market outcomes with experimental asset market data. The data show that those who have high price expectations buy more frequently and submit higher bids, and those who hold low price expectations sell more frequently and submit lower bids. Traders who have more accurate expectations achieve greater earnings. Simulations using only belief data reproduce the pricing patterns observed in the market well, indicating that the heterogeneity of expectations is a key to explaining market activity.

DOI

10.1017/s0022109018000571

Volume

54

Issue

1

Pages

215-245

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

APA 7 MLA 9 Chicago (author–date) Harvard Elsevier Harvard (JFE, JBF…) The Accounting Review Academy of Management American Marketing Association INFORMS (Management Science) Copy citation Copied ✓