How initial price history influences expectation formation in multi-asset experimental markets: An exploratory case study

Authors

DOI:

https://doi.org/10.18559/ebr.2025.2.1751

Keywords:

experimental economics, expectations, asset pricing

Abstract

We present an exploratory study on expectation formation in a controlled experimental setting. Participants predicted the prices of three risky assets, with their key information being the initial price history. Our research investigates the impact of the initial price history on overall price dynamics and the participants’ coordination. We provide tentative evidence highlighting several key points. Firstly, a stable initial price history reduces asset price volatility. Secondly, the correlation between assets during the initial price history is crucial for price dynamics. Notably, two assets exhibited strong negative dependence, which significantly influenced participants’ expectations. It is important to note that this dependence persisted in subsequent price evolution. In general, the initial price history played a pivotal role in shaping participants’ expectations. Given the exploratory nature of this study, we acknowledge that these findings are preliminary and should be interpreted with caution. 

JEL Classification

Laboratory, Group Behavior (C92)
Expectations • Speculations (D84)
Asset Pricing • Trading Volume • Bond Interest Rates (G12)
Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets (G41)

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Published

2025-07-01

Issue

Vol. 11 No. 2 (2025)

Section

Research article- regular issue

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Copyright (c) 2025 Michaela Sedláková, Aleš Kresta

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This work is licensed under a Creative Commons Attribution 4.0 International License.

How to Cite

Sedláková, M., & Kresta, A. (2025). How initial price history influences expectation formation in multi-asset experimental markets: An exploratory case study. Economics and Business Review, 11(2), 7-37. https://doi.org/10.18559/ebr.2025.2.1751

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