Advice and Fictive Learning: The Pricing of Assets in the Laboratory
AbstractA burgeoning literature in the neurosciences suggests that individuals modify their behavior not only in response to their own experiences, but also from what they learn about the experiences of others engaged in similar tasks. Importantly, these different forms of learning are associated with common neurological processes. We explore whether others’ advice provides a fictive learning signal that substitutes for one’s own experience. We examine this question in an environment where inexperienced traders frequently perform poorly – an experimental asset market. Prices in sessions with advice tend towards fundamentals mitigating the severity of price bubbles. Further, advice allays behaviors shown to yield bubbles in prior studies. Taken jointly, our data suggest that advice triggers fictive learning which helps agents avoid the “mistakes” made by naïve counterparts.
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.
Bibliographic InfoPaper provided by University of Alaska Anchorage, Department of Economics in its series Working Papers with number 2012-07.
Date of creation: Dec 2012
Date of revision:
Contact details of provider:
Web page: http://www.cbpp.uaa.alaska.edu/CBPPHome/DepartmentsandMajors/Economics.aspx
More information through EDIRC
asset pricing; laboratory experiments; advice;
Find related papers by JEL classification:
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-04-13 (All new papers)
- NEP-CBE-2013-04-13 (Cognitive & Behavioural Economics)
- NEP-EVO-2013-04-13 (Evolutionary Economics)
- NEP-EXP-2013-04-13 (Experimental Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Cheung, Stephen L. & Hedegaard, Morten & Palan, Stefan, 2014.
"To see is to believe: Common expectations in experimental asset markets,"
European Economic Review,
Elsevier, vol. 66(C), pages 84-96.
- Cheung, Stephen L. & Hedegaard, Morten & Palan, Stefan, 2012. "To See Is To Believe: Common Expectations in Experimental Asset Markets," IZA Discussion Papers 6922, Institute for the Study of Labor (IZA).
- Cheung, Stephen L. & Hedegaard, Morten & Palan, Stefan, 2012. "To See Is To Believe: Common Expectations In Experimental Asset Markets," Working Papers 2012-10, University of Sydney, School of Economics.
- Martin Dufwenberg & Tobias Lindqvist & Evan Moore, 2005. "Bubbles and Experience: An Experiment," American Economic Review, American Economic Association, vol. 95(5), pages 1731-1737, December.
- Noussair, C.N. & Lei , V. & Plott, C., 2001.
"Non-speculative bubbles in experimental asset markets: Lack of common knowledge of rationality vs. actual irrationality,"
Open Access publications from Tilburg University
urn:nbn:nl:ui:12-381105, Tilburg University.
- Lei, Vivian & Noussair, Charles N & Plott, Charles R, 2001. "Nonspeculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality vs. Actual Irrationality," Econometrica, Econometric Society, vol. 69(4), pages 831-59, July.
- Lei, V. & Noussair, C. & Plott, C.R., 1998. "Non-Speculative Bubbles in Experimental Asset Markets: Lack of Common Knowledge of Rationality Vs. Actual Irrationality," Purdue University Economics Working Papers 1120, Purdue University, Department of Economics.
- Vivian Lei & Filip Vesely, 2009. "Market Efficiency: Evidence From A No-Bubble Asset Market Experiment," Pacific Economic Review, Wiley Blackwell, vol. 14(2), pages 246-258, 05.
- John A. List, 2004.
"Neoclassical Theory Versus Prospect Theory: Evidence from the Marketplace,"
Econometric Society, vol. 72(2), pages 615-625, 03.
- John List, 2004. "Neoclassical theory versus prospect theory: Evidence from the marketplace," Framed Field Experiments 00174, The Field Experiments Website.
- John A. List, 2003. "Neoclassical Theory Versus Prospect Theory: Evidence from the Marketplace," NBER Working Papers 9736, National Bureau of Economic Research, Inc.
- John List & Michael Price, 2005.
"Conspiracies and secret price discounts in the marketplace: Evidence from field experiments,"
Framed Field Experiments
00115, The Field Experiments Website.
- John A. List & Michael K. Price, 2005. "Conspiraces and Secret Price Discounts in the Marketplace: Evidence from Field Experiments," RAND Journal of Economics, The RAND Corporation, vol. 36(3), pages 700-717, Autumn.
- Jonathan Alevy & Michael Haigh & John List, 2005.
"Information cascades: Evidence from a field experiment with financial market professionals,"
Framed Field Experiments
00116, The Field Experiments Website.
- Jonathan E. Alevy & Michael S. Haigh & John A. List, 2007. "Information Cascades: Evidence from a Field Experiment with Financial Market Professionals," Journal of Finance, American Finance Association, vol. 62(1), pages 151-180, 02.
- Alevy, Jonathan E. & Haigh, Michael S. & List, John A., 2003. "Information Cascades: Evidence From A Field Experiment With Financial Market Professionals," Working Papers 28608, University of Maryland, Department of Agricultural and Resource Economics.
- Jürgen Huber & Michael Kirchler, 2012. "The impact of instructions and procedure on reducing confusion and bubbles in experimental asset markets," Experimental Economics, Springer, vol. 15(1), pages 89-105, March.
- Werner Antweiler & Murray Z. Frank, 2004. "Is All That Talk Just Noise? The Information Content of Internet Stock Message Boards," Journal of Finance, American Finance Association, vol. 59(3), pages 1259-1294, 06.
- Mizrach, Bruce & Weerts, Susan, 2009.
"Experts online: An analysis of trading activity in a public Internet chat room,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 70(1-2), pages 266-281, May.
- Bruce Mizrach & Susan Weerts, 2004. "Experts Online: An Analysis of Trading Activity in a Public Internet Chat Room," Departmental Working Papers 200412, Rutgers University, Department of Economics.
- John A. List, 2003.
"Does Market Experience Eliminate Market Anomalies?,"
The Quarterly Journal of Economics,
MIT Press, vol. 118(1), pages 41-71, February.
- John List, 2003. "Does market experience eliminate market anomalies?," Natural Field Experiments 00297, The Field Experiments Website.
- Cary Deck & David Porter & Vernon L. Smith, 2011. "Double Bubbles in Assets Markets with Multiple Generations," Working Papers 11-10, Chapman University, Economic Science Institute.
- James C. Cox & J. Todd Swarthout, . "EconPort: Creating and Maintaining a Knowledge Commons," Experimental Economics Center Working Paper Series 2006-06, Experimental Economics Center, Andrew Young School of Policy Studies, Georgia State University.
- Robert Slonim, 2005. "Competing Against Experienced and Inexperienced Players," Experimental Economics, Springer, vol. 8(1), pages 55-75, April.
- Locke, Peter R. & Mann, Steven C., 2005. "Professional trader discipline and trade disposition," Journal of Financial Economics, Elsevier, vol. 76(2), pages 401-444, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jonathan Alevy).
If references are entirely missing, you can add them using this form.