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Learning to Forecast Price

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  • Hugh Kelley
  • Daniel Friedman

Abstract

We study learning in an individual choice price forecasting task in which subjects must learn coefficients of two independent variables in stationary linear stochastic processes. The 99 subjects each forecast in 480 trials with feedback. Learning is tracked by fitting individual forecasts to the independent variables. Results: (1) Learning is fairly consistent with respect to objective values, but with slight tendency toward overresponse. (2) Learning is noticeably slower than the Marcet-Sargent ideal. Two striking treatment effects are tendencies toward (3) overresponse with high background noise and (4) underresponse with asymmetric coefficients. Copyright 2002, Oxford University Press.

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Bibliographic Info

Article provided by Western Economic Association International in its journal Economic Inquiry.

Volume (Year): 40 (2002)
Issue (Month): 4 (October)
Pages: 556-573

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Handle: RePEc:oup:ecinqu:v:40:y:2002:i:4:p:556-573

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Cited by:
  1. Heemeijer, Peter & Hommes, Cars & Sonnemans, Joep & Tuinstra, Jan, 2009. "Price stability and volatility in markets with positive and negative expectations feedback: An experimental investigation," Journal of Economic Dynamics and Control, Elsevier, vol. 33(5), pages 1052-1072, May.
  2. Hommes, Cars & Sonnemans, Joep & Tuinstra, Jan & Van De Velden, Henk, 2007. "Learning In Cobweb Experiments," Macroeconomic Dynamics, Cambridge University Press, vol. 11(S1), pages 8-33, November.
  3. C.H. Hommes & J.H. Sonnemans & J. Tuinstra & H. van de Velde, 2003. "Learning in Cobweb Experiments," Tinbergen Institute Discussion Papers 03-020/1, Tinbergen Institute.
  4. Hommes, C.H. & Sonnemans, J. & Tuinstra, J. & Velden, H. van de, 2004. "Coordination of Expectations in Asset Pricing Experiments (Version March 2004)," CeNDEF Working Papers 04-02, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
  5. Marco Novarese, 2002. "Toward a Cognitive Experimental Economics," Experimental 0211002, EconWPA.
  6. Hommes, C.H. & Sonnemans, J. & Tuinstra, J. & Velden, H. van de, 2002. "Coordination of Expectations in Asset Pricing Experiments (Revised June 2003)," CeNDEF Working Papers 02-07, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
  7. Cars Hommes & Joep Sonnemans & Jan Tuinstra & Henk van de Velden, 2003. "Coordination of Expectations in Asset Pricing Experiments," Tinbergen Institute Discussion Papers 03-010/1, Tinbergen Institute.
  8. Domenico Colucci & Vincenzo Valori, 2004. "Generalised Fading Memory Learning in a Cobweb Model: some evidence," Computing in Economics and Finance 2004 272, Society for Computational Economics.
  9. Hommes, C.H., 2007. "Bounded Rationality and Learning in Complex Markets," CeNDEF Working Papers 07-01, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
  10. Cars Hommes & Florian Wagener, 2008. "Complex Evolutionary Systems in Behavioral Finance," Tinbergen Institute Discussion Papers 08-054/1, Tinbergen Institute.
  11. Rolison, Jonathan J. & Evans, Jonathan St. B.T. & Dennis, Ian & Walsh, Clare R., 2012. "Dual-processes in learning and judgment: Evidence from the multiple cue probability learning paradigm," Organizational Behavior and Human Decision Processes, Elsevier, vol. 118(2), pages 189-202.
  12. John Duffy, 2008. "Macroeconomics: A Survey of Laboratory Research," Working Papers 334, University of Pittsburgh, Department of Economics, revised Jun 2014.

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