What's Causing Overreaction? An Experimental Investigation of Recency and the Hot-hand Effect
AbstractA substantial body of empirical literature provides evidence of overreaction in markets. Past losers outperform past winners in stock markets as well as in sports markets. Two hypotheses are consistent with this observation. The recency hypothesis states that traders overweight recent information; they are too optimistic about winners and too pessimistic about losers. According to the hot-hand hypothesis, traders try to discover trends in the past record of a firm or a team, and thereby overestimate the autocorrelation in the series. An experimental design allows us to distinguish between these hypotheses. The evidence is consistent with the hot-hand hypothesis. Copyright The editors of the "Scandinavian Journal of Economics", 2004 .
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Wiley Blackwell in its journal The Scandinavian Journal of Economics.
Volume (Year): 106 (2004)
Issue (Month): 3 (October)
Contact details of provider:
Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442
Other versions of this item:
- Offerman, T.J.S. & Sonnemans, J., 1997. "What's Causing Overreaction? An Experimental Investigation of Recency and the Hot Hand Effect," Discussion Paper 1997-36, Tilburg University, Center for Economic Research.
- H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Offerman, Theo & Schotter, Andrew, 2009.
"Imitation and luck: An experimental study on social sampling,"
Games and Economic Behavior,
Elsevier, vol. 65(2), pages 461-502, March.
- Theo Offerman & Andrew Schotter, 2007. "Imitation and Luck: An Experimental Study on Social Sampling," Working Papers 0020, New York University, Center for Experimental Social Science.
- Morris, Michael W. & Sheldon, Oliver J. & Ames, Daniel R. & Young, Maia J, 2007. "Metaphors and the market: Consequences and preconditions of agent and object metaphors in stock market commentary," Organizational Behavior and Human Decision Processes, Elsevier, vol. 102(2), pages 174-192, March.
- Carlson, Kurt A. & Shu, Suzanne B., 2007. "The rule of three: How the third event signals the emergence of a streak," Organizational Behavior and Human Decision Processes, Elsevier, vol. 104(1), pages 113-121, September.
- Holt, Charles A. & Smith, Angela M., 2009. "An update on Bayesian updating," Journal of Economic Behavior & Organization, Elsevier, vol. 69(2), pages 125-134, February.
- Laurent Denant-Boemont & Sabrina Hammiche, 2008. "Que vaut la flexibilité des choix individuels de transport ? Une étude de cas expérimental," Économie et Prévision, Programme National Persée, vol. 182(1), pages 97-111.
- Galarza, Francisco, 2009. "Risk, Credit, and Insurance in Peru: Field Experimental Evidence," MPRA Paper 17833, University Library of Munich, Germany.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.