Does volatility matter? Expectations of price return and variability in an asset pricing experiment

Journal of Economic Behavior and Organization

Volumn 77, Issue 2, 2011, Pages 124-146

  Bottazzi, Giulio ^a   Devetag, Giovanna ^b   Pancotto, Francesca ^a  

^a SCUOLA SUPERIORE SANT ANNA   (Italy)

^b UNIVERSITY OF PERUGIA   (Italy)

Author keywords

Asset pricing; Coordination; Expectations; Experimental economics; Volatility

Indexed keywords

EID: 79551538257     PISSN: 01672681     EISSN: None     Source Type: Journal    
DOI: 10.1016/j.jebo.2010.10.001     Document Type: Article

References (36)

1. Bollerslev T., Engle R.F., Nelson D.B. Arch models. Handbook of Econometrics 1986, vol. 4:2959-3038. Elsevier.
2. Bottazzi, G., 2002. A simple micro-model of market dynamics. Part one: the " large market" deterministic limit. Working paper 2002/10, LEM, Scuola Superiore Sant'Anna, Pisa, Italy.
3. Cagan P. The monetary dynamics of hyperinflation. Studies on the Quantity Theory of Money 1994, 2959-3038. University of Chicago Press, Chicago. M. Friedman (Ed.).
4. Camerer C. Individual decision making. The Handbook of Experimental Economics 1995, 587-703. Princeton University Press. J.H. Kagel, A.E. Roth (Eds.).
5. Dacorogna M., Gençay R., Olsen U.M.R., Pictet O. An Introduction to High-Frequency Finance 2001, Academic Press, London.
6. Duffy J. Experimental macroeconomics. The New Palgrave Dictionary of Economics 2008, Palgrave Macmillan, New York. 2nd ed. S. Durlauf, L. Blume (Eds.).
7. Frankel J.A., Froot K.A. Using survey data to test standard propositions regarding exchange rate expectations. American Economic Review 1987, 77:133-153.
8. Ghysels E., Harvey A., Renault E. Stochastic volatility. Handbook of Statistics, vol. 14 1996, pp. 119-192. S. Maddala, C.R. Rao (Eds.).
9. Goetzmann, W.N., Massa, M., 2000. Daily momentum and contrarian behavior of index fund investors. NBER Working Paper 7567.
10. Grinblatt M., Keloharju M. What makes investors trade?. Journal of Finance 2001, 56:589-616.
11. Haruvy E., Lahav Y., Noussair C.N. Traders' expectations in asset markets: experimental evidence. American Economic Review 2007, 97:1901-1920.
12. Heemeijer P., Hommes C., Sonnemans J., Tuinstra J. Price stability and volatility in markets with positive and negative expectations feedback: an experimental investigation. Journal of Economic Dynamics and Control 2009, 33:1052-1072.
13. Hey J. Expectations formation: rational or adaptive or?. Journal of Economic Behavior and Organization 1994, 25:329-349.
14. Hommes C., Sonnemans J., Tuinstra J., van de Velden H. Coordination of expectations in asset pricing experiments. The Review of Financial Studies 2005, 3:954-980.
15. Hommes C., Sonnemans J., Tuinstra J., van de Velden H. Coordination of expectations in asset pricing experiments. Journal of Economic Behavior and Organization 2008, 67:116-133.
16. Jongen R., Verschoor W.F.C., Wolff C.C., Zwinkels R.C.J. Dispersion of Beliefs in the Foreign Exchange Market. Discussion papers dp6738 2008, CEPR, London, UK.
17. Kahneman D., Tversky A. Prospect theory: an analysis of decision under risk. Econometrica 1979, 47:263-291.
18. Kirchler M., Huber J. Fat tails and volatility clustering in experimental asset markets. Journal of Economic Dynamics and Control 2007, 31:1844-1874.
19. Kirchler M., Maciejovsky J. Simultaneous over and underconfidence: evidence from experimental asset markets. Journal of Risk and Uncertainty 2002, 25:65-85.
20. Macdonald M., Marsh I.W. Currency forecasters are heterogeneous: confirmation and consequences. Journal of International Money and Finance 1996, 15(5):665-685.
21. Mandelbrot B. The variation of certain speculative prices. The Journal of Business 1936, 36:394-419.
22. Marimon R., Spear S.E., Sunder S. Expectationally driven market volatility: an experimental study. Journal of Economic Theory 1993, 61:74-103.
23. Marimon R., Sunder S. Indeterminacy of equilibria in a hyperinflationary world: experimental evidence. Econometrica 1993, 61:1073-1107.
24. Markose H., Arifovic J., Sunder S. Tenth workshop on economic heterogeneous interacting agents-WEHIA 2005. Journal of Economic Dynamics and Control 2007, 31:1801-2134.
25. Odean T. Volume, volatility, price, and profit when all traders are above average. Journal of Finance 1998, 53:1887-1934.
26. Odean T Do investors trade too much?. American Economic Review 1999, 89:1279-1998.
27. Pagan A. The econometrics of financial markets. Journal of Empirical Finance 1996, 3:15-102.
28. Pfajfar, D., Zakelj, B., 2009. Experimental evidence on inflation expectation formation. Discussion paper, 2009-07, CentER, Tilburg University, Tilburg, Netherlands.
29. Plott C.R., Sunder S. Efficiency of experimental security markets with insider information: an application of rational expectations models. The Journal of Political Economy 1996, 90:663-698.
30. Shefrin H., Statman M. Behavioral aspects of the design and marketing of financial products. Financial Management 1993, 4:123-134.
31. Shiller R.J. Speculative prices and popular models. Journal of Economic Perspectives 1990, 4:55-65.
32. Smith V.L., Suchanek G.L., Williams A. Bubbles, crashes, and endogenous expectations in experimental spot asset markets. Econometrica 1988, 56:1119-1151.
33. Sonnemans J., Hommes C., Tuinstra J., de Velden H.V. The instability of a heterogeneous cobweb economy: a strategy experiment on expectation formation. Journal of Economic Behavior and Organization 2004, 54:453-481.
34. Sonnemans, J., Tuinstra, J., 2008. Positive feedback experiments and number guessing games as models of financial markets. Working paper 07-08, CeNDEF, University of Amsterdam, Netherlands.
35. Sunder S. Experimental asset markets: a survey. The Handbook of Experimental Economics 1995, 445-500. Princeton University Press, North-Holland, Amsterdam. J.H. Kagel, A.E. Roth (Eds.).
36. Turnovsky S.J. Empirical evidence on the formation of price expectations. The Journal of the American Statistical Association 1970, 65:1441-1454.