Forecasting Skills in Experimental Markets: Illusion or Reality?

102 Pages Posted: 4 Aug 2020

See all articles by Brice Corgnet

Brice Corgnet

University of Saint Etienne - Analysis Group and Economic Theory Lyon St-Etienne (GATE-LSE)

Cary Deck

Chapman University; University of Alabama

Mark DeSantis

Chapman University - The George L. Argyros College of Business and Economics

David Porter

Chapman University - The George L. Argyros College of Business and Economics

Date Written: July 8, 2020

Abstract

Using experimental asset markets, we study the situation of a financial analyst who is trying to infer the fundamental value of an asset by observing the market’s history. We find that such capacity requires both standard cognitive skills (IQ) as well as social and emotional skills. However, forecasters with high emotional skills tend to perform worse when market mispricing is high as they tend to give too much emphasis to the noisy signals from market data. By contrast, forecasters with high social skills perform especially well in markets with high levels of mispricing in which their skills could help them detect possible manipulation attempts. Finally, males outperform females in the forecasting task after controlling for a large number of relevant individual characteristics such as risk attitudes, cognitive skills, emotional intelligence, and personality traits.

Keywords: Forecasting, experimental asset markets, theory of mind, personality traits, cognitive skills

JEL Classification: C92, G17, D91, G41

Suggested Citation

Corgnet, Brice and Deck, Cary and DeSantis, Mark and Porter, David, Forecasting Skills in Experimental Markets: Illusion or Reality? (July 8, 2020). Available at SSRN: https://ssrn.com/abstract=3645967 or http://dx.doi.org/10.2139/ssrn.3645967

Brice Corgnet (Contact Author)

University of Saint Etienne - Analysis Group and Economic Theory Lyon St-Etienne (GATE-LSE) ( email )

Lyon
France

Cary Deck

Chapman University ( email )

1 University Drive
Orange, CA 92866
United States

University of Alabama ( email )

101 Paul W. Bryant Dr.
Box 870382
Tuscaloosa, AL 35487
United States

Mark DeSantis

Chapman University - The George L. Argyros College of Business and Economics ( email )

1 University Drive
Orange, CA 92866
United States

David Porter

Chapman University - The George L. Argyros College of Business and Economics ( email )

1 University Drive
Orange, CA
United States
(714) 997-6915 (Phone)
(714) 628-2881 (Fax)

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