Asset price volatility and investment horizons: An experimental investigation

Anufriev, M; Chernulich, A; Tuinstra, J

Asset price volatility and investment horizons: An experimental investigation

Anufriev, M

Chernulich, A Tuinstra, J

Permalink

Publisher:: Elsevier BV
Publication Type:: Journal Article
Citation:: Journal of Economic Behavior and Organization, 2022, 193, pp. 19-48
Issue Date:: 2022-01-01

Embargoed

	Filename	Description	Size
	Binder1.pdf	Accepted version	1.48 MB	Adobe PDF	View/Open

Copyright Clearance Process

Recently Added
In Progress
Embargoed
Open Access

This item is currently unavailable due to the publisher's embargo.

The embargo period expires on 1 Jan 2025

Full metadata record

Field	Value	Language
dc.contributor.author	Anufriev, M https://orcid.org/0000-0002-1842-6814
dc.contributor.author	Chernulich, A
dc.contributor.author	Tuinstra, J
dc.date.accessioned	2022-03-23T11:27:45Z
dc.date.available	2022-03-23T11:27:45Z
dc.date.issued	2022-01-01
dc.identifier.citation	Journal of Economic Behavior and Organization, 2022, 193, pp. 19-48
dc.identifier.issn	0167-2681
dc.identifier.uri	http://hdl.handle.net/10453/155491
dc.description.abstract	We study the effects of the investment horizon on asset price volatility using a Learning to Forecast laboratory experiment. We find that, for short investment horizons, participants coordinate on self-fulfilling trend-extrapolating predictions. Price deviations are then reinforced and amplified, possibly leading to large bubbles and crashes in asset prices. For longer investment horizons such bubbles do not emerge and price volatility tends to be lower. This is due to the fact that, for longer horizons, there is more dispersion in participants’ forecasts, and participants extrapolate trends in past prices to a lesser extent. We also show that, independent of the investment horizon, if the initial history of asset prices is already relatively stable before participants start their prediction task, price volatility remains small, with prices close to their fundamental values for the duration of the experiment.
dc.language	en
dc.publisher	Elsevier BV
dc.relation	http://purl.org/au-research/grants/arc/DP140103566
dc.relation	http://purl.org/au-research/grants/arc/DP200101438
dc.relation.ispartof	Journal of Economic Behavior and Organization
dc.relation.isbasedon	10.1016/j.jebo.2021.11.019
dc.rights	info:eu-repo/semantics/embargoedAccess
dc.subject	1401 Economic Theory, 1402 Applied Economics, 1403 Econometrics
dc.subject.classification	Economics
dc.title	Asset price volatility and investment horizons: An experimental investigation
dc.type	Journal Article
utslib.citation.volume	193
utslib.for	1401 Economic Theory
utslib.for	1402 Applied Economics
utslib.for	1403 Econometrics
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Economics Discipline
utslib.copyright.status	embargoed	*
utslib.copyright.embargo	2025-01-01T00:00:00+1000Z
dc.date.updated	2022-03-23T11:27:44Z
pubs.publication-status	Published
pubs.volume	193

Abstract:

We study the effects of the investment horizon on asset price volatility using a Learning to Forecast laboratory experiment. We find that, for short investment horizons, participants coordinate on self-fulfilling trend-extrapolating predictions. Price deviations are then reinforced and amplified, possibly leading to large bubbles and crashes in asset prices. For longer investment horizons such bubbles do not emerge and price volatility tends to be lower. This is due to the fact that, for longer horizons, there is more dispersion in participants’ forecasts, and participants extrapolate trends in past prices to a lesser extent. We also show that, independent of the investment horizon, if the initial history of asset prices is already relatively stable before participants start their prediction task, price volatility remains small, with prices close to their fundamental values for the duration of the experiment.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/155491