We experimentally study how people form predictive models of simple data generating processes (DGPs), by showing subjects data sets and asking them to predict future outputs. We find that subjects: (i) often fail to predict in this task, indicating a failure to form a model, (ii) often cannot...

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...

Previous research has documented strong peer effects in risk taking, but little is known about how such social influences affect market outcomes. The consequences of social interactions are hard to isolate in financial data, and theoretically it is not clear whether peer effects should increase...

Previous research has documented strong peer effects in risk taking, but little is known about how such social influences affect market outcomes. Since the consequences of social interactions are hard to isolate in financial data, we design an experimental asset market with multiple risky assets...