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The effect of time-varying fundamentals in Learning-to-Forecast Experiments

Simone Alfarano, Eva Camacho-Cuena, Annarita Colasante (colasante.a84@gmail.com) and Alba Ruiz-Buforn (alba.ruiz-buforn@uv.es)

MPRA Paper from University Library of Munich, Germany

Abstract: Inspired by macroeconomic scenarios, we aim to experimentally investigate the evolution of short- and long-run expectations under different specifications of the fundamentals. We collect individual predictions for the future prices in a series of Learning to Forecast Experiments with a time-varying fundamental value. In particular, we observe how expectations evolve in markets where the fundamental value follows either a V-shaped or an inverse V-shaped pattern. These conditions are compared with markets characterized by a constant and a slightly linear increasing fundamental value. We assess whether minor but systematic variations in the fundamentals affect individual short- and long-run expectations by considering positive and negative feedback-expectation systems. Even though such variations in the fundamentals turn out not to strongly affect the way subjects form their expectations in positive feedback markets, we observe significant changes in negative feedback markets.

Keywords: Long-run expectations; Coordination; Convergence; Heterogeneous expectations; Expectations feedback; Experimental economics (search for similar items in EconPapers)
JEL-codes: C91 D03 G12 (search for similar items in EconPapers)
Date: 2022-04
New Economics Papers: this item is included in nep-exp and nep-upt
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Journal Article: The effect of time-varying fundamentals in learning-to-forecast experiments (2024) Downloads
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