This study utilizes laboratory experimental methods to evaluate the empirical validity of: (1) "Muthian" rational expectations assumptions, (2) an adaptive expectations model, and (3) an extrapolative expectations model. Over 5 00 price forecasts from 146 participants in twelve experimental double-auction m arkets with a cash reward structure are analyzed. The forecasting objective is t hemean price over a sequence of trading periods governed by stationary market parameters. The price forecasts are found to be inconsistent with strict Muthian rational expectations and the extrapolative modelis not supported by the data. However, the forecasts generally support the adaptive expectations model.
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Arlington W. Williams (1987) studied this question.
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