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Home | News | Paper by Fellow Cars Hommes in Journal of The European Economic Association
News | November 01, 2019 |

Paper by Fellow Cars Hommes in Journal of The European Economic Association

The paper entitled ‘Simple Forecasting Heuristics that Make us Smart: Evidence from Different Market Experiments’ co-authored by fellow Cars Hommes (University of Amsterdam) has been published in the Journal of the European Economic Association.

Paper by Fellow Cars Hommes in Journal of The European Economic Association

The paper is co-authored with Mikhail Anufriev (University of Technology Sydney) and Tomasz Makarewicz (University of Bamberg).

Abstract:

In this paper we address the question of how individuals form expectations and invent, reinforce, and update their forecasting rules in a complex world. We do so by fitting a novel, parsimonious, and empirically validated genetic algorithm learning model with explicit heterogeneity in expectations to a set of laboratory experiments. Agents use simple linear first order price forecasting rules, adapting them to the complex evolving market environment with a Genetic Algorithm optimization procedure. The novelties are: (1) a parsimonious experimental foundation of individual forecasting behavior; (2) explanation of individual and aggregate behavior in three different experimental settings, (3) improved one- and 50-period ahead forecasting of experiments, and (4) characterization of the mean, median, and empirical distribution of forecasting heuristics. The median of the distribution of GA forecasting heuristics can be used in designing or validating simple Heuristic Switching Models.

Read full paper here.

Article Citation: 
Mikhail Anufriev, Cars Hommes, Tomasz Makarewicz, “Simple Forecasting Heuristics that Make us Smart: Evidence from Different Market Experiments”, Journal of the European Economic Association, Volume 17, Issue 5, October 2019, pp.. 1538–1584.