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Concentration and Unpredictability of Forecasts in Artificial Investment Games

Author

Listed:
  • Xiu Chen

    (Department of Economics, Hong Kong University of Science and Technology, Hong Kong)

  • Fuhai Hong

    (Division of Economics, Nanyang Technological University, 14 Nanyang Drive, Singapore 637332.)

  • Xiaojian Zhao

    (Department of Economics, Hong Kong University of Science and Technology, Hong Kong)

Abstract

This paper investigates how people’s forecasts about financial market are shaped by the environment, in which people interact before making investment decisions. By recruiting 1385 subjects on WeChat, one of the largest social media, we conduct an online experiment of artificial investment games. Our treatments manipulate whether subjects can observe others’ forecasts and whether subjects engage in public or private investment decisions. We find that subjects’ forecasts significantly converge when shared, though in different directions across groups. We also observe a strong positive correlation between forecasts and investments, suggesting that an individual’s reported forecast is associated with his belief.

Suggested Citation

  • Xiu Chen & Fuhai Hong & Xiaojian Zhao, 2016. "Concentration and Unpredictability of Forecasts in Artificial Investment Games," Economic Growth Centre Working Paper Series 1608, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.
    • Handle: RePEc:nan:wpaper:1608
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    More about this item

    Keywords

    forecast; investment; online experiment;
    All these keywords.

    JEL classification:

    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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