Reading the market? Expectation coordination and theory of mind in asset pricing experiments
Does the ability to ‘read the market’ homogenize expectations and, thus, reduce deviations from rational expectations equilibrium in learning to forecast experiments? To answer this question, we conducted a pre-registered quasi-experiment by composing the market groups based on the subject’s Theory...
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sg-ntu-dr.10356-1567132022-10-29T23:31:28Z Reading the market? Expectation coordination and theory of mind in asset pricing experiments Bao, Te Füllbrunn, Sascha Pei, Jiaoying Zong, Jichuan Interdisciplinary Graduate School (IGS) School of Social Sciences 2022 World Finance Conference Nanyang Environment and Water Research Institute NTU-WeBank Joint Research Centre Environmental Process Modelling Centre Social sciences::General Theory of Mind Strategic Uncertainty Asset Bubbles Experimental Finance Does the ability to ‘read the market’ homogenize expectations and, thus, reduce deviations from rational expectations equilibrium in learning to forecast experiments? To answer this question, we conducted a pre-registered quasi-experiment by composing the market groups based on the subject’s Theory of Mind (ToM) capabilities, elicited via the eye gaze test. On the aggregate level, we find the market with the highest ToM capabilities to form a price bubble that is about 40% smaller and coordinates better at about 75% on the price forecasts, compared to the group with the lowest ToM capabilities. However, we fail to find a significant effect between those groups comparing price and expectation dynamics. Ministry of Education (MOE) Nanyang Technological University Submitted/Accepted version This study is a pre-registered study at AEA RCT Registry (RCT ID: AEARCTR-0007836). It is approved by IRB of Dongbei University of Finance and Economics (F20210503). Financial support from a Tier 1 Grant from the MOE of Singapore (RG 69/19) and NTU-WeBank Joint Research Centre on FinTech (NWJ-2020-003) is gratefully acknowledged. 2022-10-26T05:59:40Z 2022-10-26T05:59:40Z 2022 Conference Paper Bao, T., Füllbrunn, S., Pei, J. & Zong, J. (2022). Reading the market? Expectation coordination and theory of mind in asset pricing experiments. 2022 World Finance Conference, 1-40. https://hdl.handle.net/10356/156713 https://www.world-finance-conference.com/conference.php?id=23 1 40 en RG 69/19 NWJ-2020-003 © 2022 The Author(s). Published by World Finance Conference. All rights reserved. This paper was presented in 2022 World Finance Conference and is made available with permission of The Author(s). application/pdf |
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Social sciences::General Theory of Mind Strategic Uncertainty Asset Bubbles Experimental Finance Bao, Te Füllbrunn, Sascha Pei, Jiaoying Zong, Jichuan Reading the market? Expectation coordination and theory of mind in asset pricing experiments |
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Does the ability to ‘read the market’ homogenize expectations and, thus, reduce deviations from rational expectations equilibrium in learning to forecast experiments? To answer this question, we conducted a pre-registered quasi-experiment by composing the market groups based on the subject’s Theory of Mind (ToM) capabilities, elicited via the eye gaze test. On the aggregate level, we find the market with the highest ToM capabilities to form a price bubble that is about 40% smaller and coordinates better at about 75% on the price forecasts, compared to the group with the lowest ToM capabilities. However, we fail to find a significant effect between those groups comparing price and expectation dynamics. |
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Interdisciplinary Graduate School (IGS) |
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Interdisciplinary Graduate School (IGS) Bao, Te Füllbrunn, Sascha Pei, Jiaoying Zong, Jichuan |
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Conference or Workshop Item |
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Bao, Te Füllbrunn, Sascha Pei, Jiaoying Zong, Jichuan |
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Bao, Te |
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Reading the market? Expectation coordination and theory of mind in asset pricing experiments |
title_short |
Reading the market? Expectation coordination and theory of mind in asset pricing experiments |
title_full |
Reading the market? Expectation coordination and theory of mind in asset pricing experiments |
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Reading the market? Expectation coordination and theory of mind in asset pricing experiments |
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Reading the market? Expectation coordination and theory of mind in asset pricing experiments |
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reading the market? expectation coordination and theory of mind in asset pricing experiments |
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2022 |
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https://hdl.handle.net/10356/156713 https://www.world-finance-conference.com/conference.php?id=23 |
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