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Dynamic expectation theory: insights for market participants

  • This paper develops a new methodology in order to study the role of dynamic expectations. Neither reference-point theories nor feedback models are sufficient to describe human expectations in a dynamic market environment. We use an interdisciplinary approach and demonstrate that expectations of non-learning agents are time-invariant and isotropic. On the contrary, learning enhances expectations. We uncover the “yardstick of expectations” in order to assess the impact of market developments on expectations. For the first time in the literature, we reveal new insights about the motion of dynamic expectations. Finally, the model is suitable for an AI approach and has major implications on the behaviour of market participants.

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Metadaten
Author of HS ReutlingenHerzog, Bodo
URN:urn:nbn:de:bsz:rt2-opus4-24291
DOI:https://doi.org/10.3390/jrfm12020077
ISSN:1911-8066
Erschienen in:Journal of risk and financial management : JRFM
Publisher:MDPI
Place of publication:Basel
Document Type:Article
Language:English
Year of Publication:2019
Tag:expectation theory; financial dynamics; information theory; neuroeconomics; risk management
Volume:12
Issue:2
Page Number:14
First Page:1
Last Page:14
Article Number:77
DDC classes:330 Wirtschaft
Open Access?:Ja
Licence (German):License Logo  Creative Commons - CC BY - Namensnennung 4.0 International