Evidence for ecological learning and domain specificity in rational asset pricing and market efficiency
This article is interested in how efficiently individuals can use available information, and if this will translate into efficient outcomes at the market level. Our use of available information in markets is further specified by evolutionary psychology and behavioral ecology, which extend core theory and evidence in behavioral finance throughout the reviewed literature. The survey of the social, biological and physical literature is integrative, and demonstrates how evolved design at the individual level can interact with a market environment that evolves as a complex adaptive system. In general, the analysis also highlights the central importance of complex systems in the study of rational and efficient markets.
If 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.
Volume (Year): 48 (2014)
Issue (Month): C ()
|Contact details of provider:|| Web page: http://www.elsevier.com/locate/inca/620175|
References listed on IDEAS
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.:
- Todd, Peter M. & Gigerenzer, Gerd, 2003. "Bounding rationality to the world," Journal of Economic Psychology, Elsevier, vol. 24(2), pages 143-165, April.
- Abbink, Klaus & Gary Bolton & Abdolkarim Sadrieh & Fang-Fang Tang, 1996.
"Adaptive Learning versus Punishment in Ultimatum Bargaining,"
Discussion Paper Serie B
381, University of Bonn, Germany.
- Abbink, Klaus & Bolton, Gary E. & Sadrieh, Abdolkarim & Tang, Fang-Fang, 2001. "Adaptive Learning versus Punishment in Ultimatum Bargaining," Games and Economic Behavior, Elsevier, vol. 37(1), pages 1-25, October.
- Brock, William A. & Hommes, Cars H., 1998.
"Heterogeneous beliefs and routes to chaos in a simple asset pricing model,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 22(8-9), pages 1235-1274, August.
- Brock, W.A. & Hommes, C.H., 1996. "Hetergeneous Beliefs and Routes to Chaos in a Simple Asset Pricing Model," Working papers 9621, Wisconsin Madison - Social Systems.
- Yao, Jing & Li, Duan, 2013. "Bounded rationality as a source of loss aversion and optimism: A study of psychological adaptation under incomplete information," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 18-31.
- Evans, George W. & Honkapohja, Seppo, 2003.
"Adaptive Learning and Monetary Policy Design,"
CEPR Discussion Papers
3962, C.E.P.R. Discussion Papers.
- George W. Evans & Seppo Honkapohja, 2002. "Adaptive Learning and Monetary Policy Design," University of Oregon Economics Department Working Papers 2002-18, University of Oregon Economics Department, revised 04 Mar 2004.
- Evans, George W. & Honkapohja, Seppo, 2002. "Adaptive learning and monetary policy design," Research Discussion Papers 29/2002, Bank of Finland.
- George W. Evans & Seppo Honkapohja, 2004. "Adaptive learning and monetary policy design," Macroeconomics 0405008, EconWPA.
- Robert J. Waldmann, 1992. "Income Distribution and Infant Mortality," The Quarterly Journal of Economics, Oxford University Press, vol. 107(4), pages 1283-1302.
- Kahneman, Daniel & Tversky, Amos, 1979.
"Prospect Theory: An Analysis of Decision under Risk,"
Econometric Society, vol. 47(2), pages 263-91, March.
- Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
- Craig R. Fox & Amos Tversky, 1995. "Ambiguity Aversion and Comparative Ignorance," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 585-603.
- Epstein, Larry G & Wang, Tan, 1994. "Intertemporal Asset Pricing Under Knightian Uncertainty," Econometrica, Econometric Society, vol. 62(2), pages 283-322, March.
- Eugene F Fama, .
"Market Efficiency, Long-Term Returns, and Behavioral Finance,"
CRSP working papers
448, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Fama, Eugene F., 1998. "Market efficiency, long-term returns, and behavioral finance," Journal of Financial Economics, Elsevier, vol. 49(3), pages 283-306, September.
- Eugene F. Fama, . "Market Efficiency, Long-term Returns, and Behavioral Finance," CRSP working papers 340, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Sarah E. Hill & H. Kern Reeve, 2005. "Low fertility in humans as the evolutionary outcome of snowballing resource games," Behavioral Ecology, International Society for Behavioral Ecology, vol. 16(2), pages 398-402, March.
- Thaler, Richard, 1980. "Toward a positive theory of consumer choice," Journal of Economic Behavior & Organization, Elsevier, vol. 1(1), pages 39-60, March.
- Bao, Te & Hommes, Cars & Sonnemans, Joep & Tuinstra, Jan, 2012.
"Individual expectations, limited rationality and aggregate outcomes,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 36(8), pages 1101-1120.
- Te Bao & Cars Hommes & Joep Sonnemans & Jan Tuinstra, 2012. "Individual Expectations, Limited Rationality and Aggregate Outcomes," Tinbergen Institute Discussion Papers 12-016/1, Tinbergen Institute.
- Bao, T. & Hommes, C.H. & Sonnemans, J. & Tuinstra, J., 2010. "Individual Expectations, Limited Rationality and Aggregate Outcomes," CeNDEF Working Papers 10-07, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
- Barberis, Nicholas & Thaler, Richard, 2003.
"A survey of behavioral finance,"
Handbook of the Economics of Finance,
in: G.M. Constantinides & M. Harris & R. M. Stulz (ed.), Handbook of the Economics of Finance, edition 1, volume 1, chapter 18, pages 1053-1128
- Mikhail Anufriev & Cars Hommes, 2012. "Evolutionary Selection of Individual Expectations and Aggregate Outcomes in Asset Pricing Experiments," American Economic Journal: Microeconomics, American Economic Association, vol. 4(4), pages 35-64, November.
- Robert J. Shiller, 2003.
"From Efficient Markets Theory to Behavioral Finance,"
Journal of Economic Perspectives,
American Economic Association, vol. 17(1), pages 83-104, Winter.
- Robert J. Shiller, 2002. "From Efficient Market Theory to Behavioral Finance," Cowles Foundation Discussion Papers 1385, Cowles Foundation for Research in Economics, Yale University.
- Han Ozsoylev & Jan Werner, 2011. "Liquidity and asset prices in rational expectations equilibrium with ambiguous information," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 48(2), pages 469-491, October.
- Kwon, Okyu & Yang, Jae-Suk, 2008. "Information flow between composite stock index and individual stocks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(12), pages 2851-2856.
- Evan W. Anderson & Lars Peter Hansen & Thomas J. Sargent, 2003. "A Quartet of Semigroups for Model Specification, Robustness, Prices of Risk, and Model Detection," Journal of the European Economic Association, MIT Press, vol. 1(1), pages 68-123, 03.
- Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
- Hommes, C.H., 2010.
"The Heterogeneous Expectations Hypothesis: Some Evidence from the Lab,"
CeNDEF Working Papers
10-06, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
- Hommes, Cars, 2011. "The heterogeneous expectations hypothesis: Some evidence from the lab," Journal of Economic Dynamics and Control, Elsevier, vol. 35(1), pages 1-24, January.
- Cars Hommes, 2010. "The heterogeneous expectations hypothesis: some evidence from the lab," Post-Print hal-00753041, HAL.
- Terrance Odean, 1998. "Are Investors Reluctant to Realize Their Losses?," Journal of Finance, American Finance Association, vol. 53(5), pages 1775-1798, October.
- Simon Weidenholzer, 2010. "Coordination Games and Local Interactions: A Survey of the Game Theoretic Literature," Games, MDPI, Open Access Journal, vol. 1(4), pages 551, November.
- Nikolay Nenovsky & S. Statev, 2006. "Introduction," Post-Print halshs-00260898, HAL.
- Blume, Lawrence & Easley, David, 1992. "Evolution and market behavior," Journal of Economic Theory, Elsevier, vol. 58(1), pages 9-40, October.
- Brad M. Barber & Terrance Odean, 2008. "All That Glitters: The Effect of Attention and News on the Buying Behavior of Individual and Institutional Investors," Review of Financial Studies, Society for Financial Studies, vol. 21(2), pages 785-818, April.
- M. Ruth & K. Donaghy & P. Kirshen, 2006. "Introduction," Chapters, in: Regional Climate Change and Variability, chapter 1 Edward Elgar Publishing.
- Doron Sonsino & Uri Benzion & Galit Mador, 2002. "The Complexity Effects on Choice with Uncertainty — Experimental Evidence," Economic Journal, Royal Economic Society, vol. 112(482), pages 936-965, October.
- Zhi Da & Joseph Engelberg & Pengjie Gao, 2011. "In Search of Attention," Journal of Finance, American Finance Association, vol. 66(5), pages 1461-1499, October.
- Y. Shapira & D. Y. Kenett & E. Ben-Jacob, 2009. "The Index cohesive effect on stock market correlations," The European Physical Journal B - Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 72(4), pages 657-669, December.
- Xue, Yi & Gençay, Ramazan, 2012.
"Hierarchical information and the rate of information diffusion,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 36(9), pages 1372-1401.
- Yi Xue & Ramazan Gencay, 2009. "Hierarchical Information and the Rate of Information Diffusion," Working Paper Series 29_09, The Rimini Centre for Economic Analysis.
- Christoph Salge & Daniel Polani, 2011. "Digested Information as an Information Theoretic Motivation for Social Interaction," Journal of Artificial Societies and Social Simulation, Journal of Artificial Societies and Social Simulation, vol. 14(1), pages 5.
- Brett Inder & Terry O'Brien, 2003. "The Endowment Effect and the Role of Uncertainty," Bulletin of Economic Research, Wiley Blackwell, vol. 55(3), pages 289-301, 07.
- Boyarchenko, Nina, 2012. "Ambiguity shifts and the 2007–2008 financial crisis," Journal of Monetary Economics, Elsevier, vol. 59(5), pages 493-507.
- Lars Peter Hansen & Thomas J. Sargent, 2010. "Fragile beliefs and the price of uncertainty," Quantitative Economics, Econometric Society, vol. 1(1), pages 129-162, 07.
- Hansen, Lars Peter & Sargent, Thomas J. & Turmuhambetova, Gauhar & Williams, Noah, 2006. "Robust control and model misspecification," Journal of Economic Theory, Elsevier, vol. 128(1), pages 45-90, May.
- Xue-Zhong He & Youwei Li, 2008. "Heterogeneity, convergence, and autocorrelations," Quantitative Finance, Taylor & Francis Journals, vol. 8(1), pages 59-79.
When requesting a correction, please mention this item's handle: RePEc:eee:soceco:v:48:y:2014:i:c:p:27-39. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
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.