Presented by Charles I. Plosser, President and Chief Executive Officer, Federal Reserve Bank of Philadelphia> Cato Institute’s 28th Annual Monetary Conference, Washington, D.C., November 18, 2010

This paper reports the results of 15 experimental asset markets designed to investigate the effect of optimistic forecast bias on market behavior. Each market is organized as a double oral auction in which participants trade a single-period asset with uncertain value. Traders are informed of the...