Finance Seminar: Zwetelina Iliewa, Centre for European Economic Research (ZEW)

Title: Thinking about Prices versus Thinking about Returns in Financial Markets

2017.06.21 | Bodil Westermann Krog

Date Thu 14 Sep
Time 14:15 15:15
Location Fuglesangs Allé 4, 8210 Aarhus V, building 2630(K), room 101

Speaker: Zwetelina Iliewa, Centre for European Economic Research (ZEW)

Title (and link to paper): Thinking about Prices versus Thinking about Returns in Financial Markets (with Markus Glaser and Martin Weber)

Abstract: Prices and returns are alternative ways to present information and to elicit expectations in financial markets. But do investors make sense of prices and returns in the same way? This paper presents three studies with subjects of varying expertise, with various amounts of information and with different incentive schemes. The results are consistent across all studies: Asking subjects to forecast returns as opposed to prices results in higher expectations, whereas showing them return charts as opposed to price charts results in lower expectations. Experience is not a useful remedy but Cognitive Reflection mitigates the impact of format changes.

Area of Research: Experimental Finance

Organizers: Paolo Santucci de Magistris and Agatha Murgoci

Finance and Accounting Seminar Series