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Andries, Marianne
, Bianchi, Milo, Huynh, Karen and Pouget, Sébastien
(2024)
Return Predictability, Expectations, and Investment: Experimental Evidence.
TSE Working Paper, n. 1561, Toulouse
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Abstract
In an investment experiment, we show variations in information affect belief and decision behaviors within the information-beliefs-decisions chain. Subjects observe the time series of a risky asset and a signal that, in random rounds, helps predict returns. When they perceive the signal as useless, subjects form extrapolative forecasts, and their investment decisions underreact to their beliefs. When they perceive the signal as predictive, the same subjects rationally use it in their forecasts, they no longer extrapolate, and they rely significantly more on their forecasts when making risk allocations. Analyzing investments without observing forecasts and information sets leads to erroneous interpretations.
| Item Type: | Monograph (Working Paper) |
|---|---|
| Language: | English |
| Date: | August 2024 |
| Place of Publication: | Toulouse |
| Uncontrolled Keywords: | Return Predictability, Expectations, Long-Term Investment, Extrapolation, Model Uncertainty. |
| JEL Classification: | D84 - Expectations; Speculations G11 - Portfolio Choice; Investment Decisions |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse) |
| Institution: | Université Toulouse Capitole |
| Site: | UT1 |
| Date Deposited: | 29 Aug 2024 06:50 |
| Last Modified: | 14 Jan 2026 14:21 |
| OAI Identifier: | oai:tse-fr.eu:129666 |
| URI: | https://publications.ut-capitole.fr/id/eprint/49621 |
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- Return Predictability, Expectations, and Investment: Experimental Evidence. (deposited 29 Aug 2024 06:50) [Currently Displayed]
