Pattern-Based Expectations: International Experimental Evidence and Applications in Financial Economics

Tobias F. Rötheli
Additional contact information
Tobias F. Rötheli: University of Erfurt

The Review of Economics and Statistics, 2011, vol. 93, issue 4, 1319-1330

Abstract: We study how subjects extrapolate simple patterns in financial time series in order to develop a descriptive model of actual agent behavior. The laboratory experiment for this analysis was conducted in Germany and Japan. Statistical analyses indicate considerable similarity in expectations formation across cultures and document that agents' expectations are at variance with the notion of standard trend extrapolation. The paper then proposes a method for computing expectations for any economic time series based on the experimental data. Such pattern-based expectations are shown to explain stock prices and the dynamics of the forward discount on the foreign exchange market. © 2011 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Date: 2011
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.mitpressjournals.org/doi/pdf/10.1162/REST_a_00125 link to full text (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tpr:restat:v:93:y:2011:i:4:p:1319-1330

Ordering information: This journal article can be ordered from
https://mitpressjour ... rnal/?issn=0034-6535

Access Statistics for this article

The Review of Economics and Statistics is currently edited by Pierre Azoulay, Olivier Coibion, Will Dobbie, Raymond Fisman, Benjamin R. Handel, Brian A. Jacob, Kareen Rozen, Xiaoxia Shi, Tavneet Suri and Yi Xu

More articles in The Review of Economics and Statistics from MIT Press
Bibliographic data for series maintained by The MIT Press ().