What Goes Up Must Come Down? Experimental Evidence on Intuitive Forecasting

• Published in: The American economic review Vol. 103; no. 3; pp. 570 - 574
• Main Authors: Beshears, John, Choi, James J., Fuster, Andreas, Laibson, David, Madrian, Brigitte C.
• Format: Journal Article
• Language: English
• Published: United States American Economic Association 01.05.2013; American Economic Assoc
• Subjects: Analytical forecasting; Central banks; Earnings; Economic dynamics; Economic expectations; Economic forecasting; Economic forecasting models; Economic forecasts; Economics; Experiments; Forecasting; Forecasting models; Forecasting standards; Laboratories; Modeling; Rational expectations theory; Risk aversion; Statistical forecasts; STRUCTURAL BEHAVIORAL ECONOMICS; Studies; Time series; Time series forecasting

Do laboratory subjects correctly perceive the dynamics of a mean-reverting time series? In our experiment, subjects receive historical data and make forecasts at different horizons. The time series process that we use features short-run momentum and long-run partial mean reversion. Half of the subje...