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Initial anchors and limited information in learning-to-forecast experiments

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  • Xiao, Wei

Abstract

In this paper, I introduce two novel treatments into learning-to-forecast experiments: an initial anchor and a limited information treatment. The initial anchor pins down the subjects’ initial expectations and makes cross-session results more comparable. In the limited information treatment, subjects can only observe the most recent market outcome. Surprisingly, price dynamics do not differ between full and limited information sessions. This suggests that when making decisions, subjects disregard most information and rely primarily on a few recent observations. Furthermore, regardless of the market’s feedback system, positive or negative, subjects predominantly use a single heuristic to form expectations.

Suggested Citation

  • Xiao, Wei, 2024. "Initial anchors and limited information in learning-to-forecast experiments," Journal of Economic Behavior & Organization, Elsevier, vol. 225(C), pages 192-227.
  • Handle: RePEc:eee:jeborg:v:225:y:2024:i:c:p:192-227
    DOI: 10.1016/j.jebo.2024.06.038
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    References listed on IDEAS

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    4. Bao, Te & Hennequin, Myrna & Hommes, Cars & Massaro, Domenico, 2020. "Coordination on bubbles in large-group asset pricing experiments," Journal of Economic Dynamics and Control, Elsevier, vol. 110(C).
    5. Hommes,Cars, 2015. "Behavioral Rationality and Heterogeneous Expectations in Complex Economic Systems," Cambridge Books, Cambridge University Press, number 9781107564978, January.
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    8. Cars Hommes, 2021. "Behavioral and Experimental Macroeconomics and Policy Analysis: A Complex Systems Approach," Journal of Economic Literature, American Economic Association, vol. 59(1), pages 149-219, March.
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    More about this item

    Keywords

    Anchoring-and-adjustment; Learning-to-forecast; Behavioral learning; Bounded rationality;
    All these keywords.

    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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