I work on applied microeconomics. I typically use microeconometrics methods, including ordinary regressions, panel data methods, and structural estimation. I am interested in empirical industrial organization, macroeconomic experiments and investment decisions.
Using a new experimental design, we show how asset prices and the overconfidence of traders co-move; when asset prices go up, overconfidence rises, and when asset prices go down, overconfidence falls. Consistent with models of endogenous overconfidence (Daniel et al., 1998; Gervais and Odean, 2001), we observe that becoming successful makes traders overconfident, yet becoming overconfident does not necessarily make traders successful. Finally, we confirm existing experimental evidence that high cognitive ability results in better market performance.
Endogenous overconfidence, behavioral finance, experiment
Currently under review. Supplementary page.
This paper examines how traders’ certainty and market certainty affect outcomes in an experimental asset market with known fundamental values. In this type of market, prices usually present large deviations from the fundamental value; in other words, bubbles are known to occur. We measure beliefs by asking participants to forecast the one-period-ahead price as a discrete probability mass distribution. We define certainty as the inverse of the dispersion of beliefs for each trader, and also create a market-wide measure of this to measure agreement across traders. We find that certainty affects price-formation and is also important in explaining the dynamics and size of the bubble. Moreover, as traders are successful they become increasingly more certain in their beliefs, even if these are on nonfundamental values, thus increasing the likelihood of price bubbles.
experimental finance, experimental asset markets, expectations, endogenous news
Durable investments and subsidies: The case of Danish wind turbines
I propose a model for investment in green technology. In each period, investors have the option to invest in a new piece of capital. The expected value is a function of market prices, policy and the quality of the capital. In addition, capital investment can be delayed, given rise to a real option interpretation of the problem.
The impact of macroeconomic uncertainty on demand: A case study of demand for the us Airline Industry
The impact of uncertainty on economic performance is an ongoing research area. This paper empirically examines how economic uncertainty may affect the demand decisions of consumers using us micro demand data. I find that the elasticity of uncertainty on overall is economically and statistically significant.
You can contact me by sending an email to rasmus at pank.eu.