Publications
Publications
- 2013
- American Economic Review: Papers and Proceedings
What Goes Up Must Come Down? Experimental Evidence on Intuitive Forecasting
By: John Beshears, James J. Choi, Andreas Fuster, David Laibson and Brigitte C. Madrian
Abstract
Do laboratory subjects correctly perceive the dynamics of a mean-reverting time series? In our experiment, subjects receive historical data and make forecasts at different horizons. The time series process that we use features short-run momentum and long-run partial mean reversion. Half of the subjects see a version of this process in which the momentum and partial mean reversion unfold over 10 periods ("fast"), while the other subjects see a version with dynamics that unfold over 50 periods ("slow"). Typical subjects recognize most of the mean reversion of the fast process and none of the mean reversion of the slow process.
Keywords
Citation
Beshears, John, James J. Choi, Andreas Fuster, David Laibson, and Brigitte C. Madrian. "What Goes Up Must Come Down? Experimental Evidence on Intuitive Forecasting." American Economic Review: Papers and Proceedings 103, no. 3 (May 2013): 570–574.