We experimentally explore how investor decision horizons influence the formation of stock prices. We find that in long-horizon sessions, where investors collect dividends till maturity, prices converge to the fundamental levels derived from dividends through backward induction. In short-horizon...

We consider individual's portfolio selection problems. Introducing the concept of ambiguity, we show the existence of portfolio inertia under the assumptions that decision maker's beliefs are captured by an inner measure, and that her preferences are represented by the Choquet integral with...

This paper analyzes investors' portfolio selection problems in a two-period dynamic model of Knightian uncertainty. We account for the existence of portfolio inertia in this two-period framework. Furthermore, by incorporating investors' up-dating behavior, we analyze how new observation in the...