Adaptive expectations, confirmatory bias, and informational efficiency

Résultats de recherche: Livre/Rapport/RevueAutre rapport

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Résumé

We study the informational efficiency of a market with a single traded asset. The price initially differs from the fundamental value, about which the agents have noisy private information (which is, on average, correct). A fraction of traders revise their price expectations in each period. The price at which the asset is traded is public information. The agents' expectations have an adaptive component and a social-interactions component with confirmatory bias. We show that, taken separately, each of the deviations from rationality worsens the informational efficiency of the market. However, when the two biases are combined, the degree of informational inefficiency of the market (measured as the deviation of the long-run market price from the fundamental value of the asset) can be non-monotonic both in the weight of the adaptive component and in the degree of confirmatory bias. For some ranges of parameters, two biases tend to mitigate each other's effect, thus increasing informational efficiency.
langue originaleAnglais
Lieu de publicationNamur
EditeurFUNDP. Namur center for complex systems
Volume1
Edition2
étatPublié - 23 sept. 2010

Série de publications

NomnaXys Technical Reports Series
EditeurUniversity of Namur
Numéro2
Volume1

Empreinte digitale

Adaptive expectations
Informational efficiency
Confirmation bias
Assets
Deviation
Fundamental values
Traders
Market price
Price expectations
Public information
Private information
Rationality
Social interaction
Inefficiency

Citer ceci

Aldashev, G., Carletti, T., & Righi, S. (2010). Adaptive expectations, confirmatory bias, and informational efficiency. (2 Ed.) (naXys Technical Reports Series; Vol 1, Numéro 2). Namur: FUNDP. Namur center for complex systems.
Aldashev, Gani ; Carletti, Timoteo ; Righi, Simone. / Adaptive expectations, confirmatory bias, and informational efficiency. 2 Ed. Namur : FUNDP. Namur center for complex systems, 2010. (naXys Technical Reports Series; 2).
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abstract = "We study the informational efficiency of a market with a single traded asset. The price initially differs from the fundamental value, about which the agents have noisy private information (which is, on average, correct). A fraction of traders revise their price expectations in each period. The price at which the asset is traded is public information. The agents' expectations have an adaptive component and a social-interactions component with confirmatory bias. We show that, taken separately, each of the deviations from rationality worsens the informational efficiency of the market. However, when the two biases are combined, the degree of informational inefficiency of the market (measured as the deviation of the long-run market price from the fundamental value of the asset) can be non-monotonic both in the weight of the adaptive component and in the degree of confirmatory bias. For some ranges of parameters, two biases tend to mitigate each other's effect, thus increasing informational efficiency.",
keywords = "asset pricing, confirmatory bias, agent-based models, informational efficiency",
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Aldashev, G, Carletti, T & Righi, S 2010, Adaptive expectations, confirmatory bias, and informational efficiency. naXys Technical Reports Series, Numéro 2, VOL. 1, VOL. 1, 2 edn, FUNDP. Namur center for complex systems, Namur.

Adaptive expectations, confirmatory bias, and informational efficiency. / Aldashev, Gani; Carletti, Timoteo; Righi, Simone.

2 Ed. Namur : FUNDP. Namur center for complex systems, 2010. (naXys Technical Reports Series; Vol 1, Numéro 2).

Résultats de recherche: Livre/Rapport/RevueAutre rapport

TY - BOOK

T1 - Adaptive expectations, confirmatory bias, and informational efficiency

AU - Aldashev, Gani

AU - Carletti, Timoteo

AU - Righi, Simone

N1 - Publication code : FP SB092/2010/02 ; SB04977/2010/02

PY - 2010/9/23

Y1 - 2010/9/23

N2 - We study the informational efficiency of a market with a single traded asset. The price initially differs from the fundamental value, about which the agents have noisy private information (which is, on average, correct). A fraction of traders revise their price expectations in each period. The price at which the asset is traded is public information. The agents' expectations have an adaptive component and a social-interactions component with confirmatory bias. We show that, taken separately, each of the deviations from rationality worsens the informational efficiency of the market. However, when the two biases are combined, the degree of informational inefficiency of the market (measured as the deviation of the long-run market price from the fundamental value of the asset) can be non-monotonic both in the weight of the adaptive component and in the degree of confirmatory bias. For some ranges of parameters, two biases tend to mitigate each other's effect, thus increasing informational efficiency.

AB - We study the informational efficiency of a market with a single traded asset. The price initially differs from the fundamental value, about which the agents have noisy private information (which is, on average, correct). A fraction of traders revise their price expectations in each period. The price at which the asset is traded is public information. The agents' expectations have an adaptive component and a social-interactions component with confirmatory bias. We show that, taken separately, each of the deviations from rationality worsens the informational efficiency of the market. However, when the two biases are combined, the degree of informational inefficiency of the market (measured as the deviation of the long-run market price from the fundamental value of the asset) can be non-monotonic both in the weight of the adaptive component and in the degree of confirmatory bias. For some ranges of parameters, two biases tend to mitigate each other's effect, thus increasing informational efficiency.

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KW - confirmatory bias

KW - agent-based models

KW - informational efficiency

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BT - Adaptive expectations, confirmatory bias, and informational efficiency

PB - FUNDP. Namur center for complex systems

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Aldashev G, Carletti T, Righi S. Adaptive expectations, confirmatory bias, and informational efficiency. 2 Ed. Namur: FUNDP. Namur center for complex systems, 2010. (naXys Technical Reports Series; 2).