Reference : Disposition Effect, Expectations and Behavior: Essays in Experimental Finance
Dissertations and theses : Doctoral thesis
Business & economic sciences : Finance
Disposition Effect, Expectations and Behavior: Essays in Experimental Finance
Carlé, Tim Alexander mailto [University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Luxembourg School of Finance (LSF) >]
University of Luxembourg, ​Luxembourg, ​​Luxembourg
Docteur en Sciences Financières
Neugebauer, Tibor mailto
[en] Experimental Finance ; Disposition Effect ; Expectations ; Ostrich Effect ; Trade ; Belief Dispersion
[en] This thesis indicates future price expectations and past returns as major determinants for trading decisions in experimental asset markets. Both determinants persist independently of the market institutions continuous double auction market or once per period closing call auction market. Investor subjects are shown to submit more market sell orders after positive returns than after negative returns. They sell more assets with a past positive return, especially when this return is higher than the market return. Expectations about a positive return also lead to more sales of assets with past positive returns. Those investor subjects who have high price expectations buy more frequently and submit higher bids and asks, and those who hold low price expectations sell more frequently and submit lower bids and asks, than average. Future price expectations are adapted based on market outcome when investors receive feedback about market prices. The results do not reveal a significant relationship between transaction volume and the heterogeneity of price expectations, rather they support a positive relationship between the heterogeneity of price expectations and prices. Heterogeneity in price expectations decreases with experience, but markets are not able to homogenize expectations to reach a no-trade equilibrium.
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