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Published September 2000 | public
Journal Article

Expectations and learning in Iowa

Abstract

We study the rationality of learning and the biases in expectations in the Iowa Experimental Markets. Using novel tests developed in (Bossaerts, P., 1996. Martingale restrictions on equilibrium security prices under rational expectations and consistent beliefs. Caltech working paper; Bossaerts, P., 1997. The dynamics of equity prices in fallible markets. Caltech working paper), learning in the Iowa winner-take-all markets is found to be in accordance with the rules of conditional probability (Bayes' law). Hence, participants correctly update their beliefs using the available information. There is evidence, however, that beliefs do not satisfy the restrictions of rational expectations that they reflect the factual distribution of outcomes.

Additional Information

© 2000 Elsevier Science B.V. Received 27 July 1997, Accepted 2 September 1999, Available online 15 August 2000.

Additional details

Created:
August 21, 2023
Modified:
October 17, 2023