Models with heterogeneous interacting agents explain macro phenomena through interactions at the micro level. We propose genetic algorithms as a model for individual expectations to explain aggregate market phenomena. The model explains all stylized facts observed in aggregate price fluctuations...

We conduct laboratory experiments on variants of market scoring rule prediction markets, under different information distribution patterns, in order to evaluate the efficiency and speed of information aggregation, as well as test recent theoretical results on manipulative behavior by traders. We...

This paper studies a robustness of solutions in finite depth of reasoning models. The level-k and cognitive hierarchy models conventionally assume that each player has a commonly known anchor behavior to obtain a sharp prediction. We provide a general framework to examine whether the obtained...

We conduct a lab experiment to investigate an important corporate prediction market setting: A manager needs information about the state of a project, which workers have, in order to make a state-dependent decision. Workers can potentially reveal this information by trading in a corporate...

The way in which individual expectations shape aggregate macroeconomic variables is crucial for the transmission and effectiveness of monetary policy. We study the individual expectations formation process and the interaction with monetary policy, within a standard New Keynesian model, by means...

We experimentally investigate how price expectations are formed in a large asset market where subjects' only task is to forecast the future price of a risky asset. The realized prices depend on these expectations. We observe small (6 participants) and large markets (about 100 participants). In...

Using a laboratory experiment, we investigate whether comovement can emerge between two risky assets, despite their fundamentals not being correlated. The ‘Two trees' asset pricing model developed by Cochrane et al. (2007) guides our experimental design and its predictions serve as our source...

Rational Expectations (RE) models have two crucial dimensions: 1) agents correctly forecast future prices given all available information, and 2) given expectations, agents solve optimization problems and these solutions in turn determine actual price realizations. Experimental testing of such...