Economics at your fingertips  

Can successful forecasters help stabilize asset prices in a learning to forecast experiment?

Dávid Kopányi (), Jean Paul Rabanal (), Olga Rud () and Jan Tuinstra ()

No 140, Working Papers from Peruvian Economic Association

Abstract: We conduct a Learning to Forecast asset pricing experiment where the market impact of individual forecasts evolves endogenously based on the forecasters’ past accuracy. We investigate how endogenous impacts affect price stability and mispricing relative to the fundamental price. Our results suggest that endogenous impacts can destabilize markets when impacts are quite sensitive to forecast accuracy: Price dispersion increases compared to the baseline treatment where impacts are constant and independent of forecast accuracy. On the other hand, mispricing can be reduced when markets are relatively stable and impacts are moderately sensitive to forecast accuracy.

Keywords: Experimental finance; market impact; expectation formation; asset pricing; learning to forecast (search for similar items in EconPapers)
JEL-codes: C91 C92 D53 D84 G12 (search for similar items in EconPapers)
Date: 2019-01
New Economics Papers: this item is included in nep-exp
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link) Application/pdf

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:

Access Statistics for this paper

More papers in Working Papers from Peruvian Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Nelson Ramírez-Rondán ().

Page updated 2021-11-29
Handle: RePEc:apc:wpaper:140