We provide empirical evidence that the optimism bias increases with the forecasting horizon. We label this empirical regularity the horizon bias. In the US and abroad, professional forecasters demonstrate significant horizon bias in their macroeconomic expectations. Our results show a horizon...

Exploiting the near-experimental conditions provided by the British Pound market in US Dollars during the Brexit vote of June 23rd, 2016, we unearth a major challenge to the Efficient Market Hypothesis. With a single factor of prior polling information, we show that the Brexit result could have...

Markowitz (1952) hat gezeigt, dass es für risikoaverse Wirtschaftssubjekte sinnvoll ist, das Vermögen auf verschiedene Anlageinstrumente zu verteilen. Doch erweist sich in der Praxis, dass Wirtschaftssubjekte häufig nicht-optimal diversifizierte Portfolios halten. Es gibt viele mögliche...

We present new experimental evidence on heterogeneity in the formation of inflation expectations and relate the variation to economic literacy and demographics. The experimental design allows us to investigate two channels through which expectations-formation may vary across individuals: (1) the...

This paper presents a simple experiment on how laypeople form macroeconomic expectations. Subjects have to forecast inflation and GDP growth. By varying the information provided in different treatments, we can assess the importance of historical time-series information versus information...

Forecasts of macroeconomic variables as the inflation rate serve as important guidelines for the private as well as the public sector. At least central banks that adopted an inflation targeting regime are in urgent need of high quality inflation forecasts. Accurate inflation forecasts are also...

This paper compares the behavior of subject' uncertainty in different monetary policy environments when forecasting inflation in the laboratory. We find that inflation targeting produces lower uncertainty and higher accuracy of interval forecasts than inflation forecast targeting. We also...

A key question in economic research and policymaking is to what extent one can use simplified models. This paper addresses this question by comparing the results of two learning-to-forecast laboratory experiments: one design based on the reduced form of a New-Keynesian model; and one design...

Growing evidence shows that biological factors affect individual financial decisions that could be reflected in financial markets. Testosterone, a chemical messenger especially influential in male physiology, has been shown to affect economic decision making, and is taken as a...

Using laboratory experiments within a New Keynesian framework, we explore the interaction between the formation of inflation expectations and monetary policy design. The central question in this paper is how to design monetary policy when expectations formation is not perfectly rational....