IDEAS home Printed from https://ideas.repec.org/a/eee/jeborg/v219y2024icp510-527.html
   My bibliography  Save this article

Reading the market? Expectation coordination and theory of mind

Author

Listed:
  • Bao, Te
  • Füllbrunn, Sascha
  • Pei, Jiaoying
  • Zong, Jichuan

Abstract

Suppose that all asset market traders are proficient at reading the market. Would markets become more stable, resulting in lower volatility and fewer price bubbles? To answer this question, we test whether Theory of Mind (ToM) capabilities enhance expectation coordination and reduce expectation heterogeneity and price bubbles in learning-to-forecast experiments. We compare the price and expectation dynamics between markets composed of participants with either high or low ToM capabilities as measured by the eye gaze test. Despite an economically substantial difference between the two groups, we find no statistically significant differences in the measures of expectation coordination, price bubbles, market stability, and expectation heterogeneity.

Suggested Citation

  • Bao, Te & Füllbrunn, Sascha & Pei, Jiaoying & Zong, Jichuan, 2024. "Reading the market? Expectation coordination and theory of mind," Journal of Economic Behavior & Organization, Elsevier, vol. 219(C), pages 510-527.
    • Handle: RePEc:eee:jeborg:v:219:y:2024:i:c:p:510-527
    DOI: 10.1016/j.jebo.2024.01.018
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167268124000246
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.jebo.2024.01.018?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Theory of mind; Strategic uncertainty; Asset bubbles; Experimental Finance;
    All these keywords.

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jeborg:v:219:y:2024:i:c:p:510-527. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/jebo .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.