RT Journal Article
SR Electronic
T1 What Do Humans Perceive in Asset Returns?
JF The Journal of Portfolio Management
FD Institutional Investor Journals
SP 49
OP 60
DO 10.3905/jpm.2019.45.4.049
VO 45
IS 4
A1 Jasmina Hasanhodzic
A1 Andrew W. Lo
A1 Emanuele Viola
YR 2019
UL https://pm-research.com/content/45/4/49.abstract
AB In this article, the authors run experiments to test if and how human subjects can differentiate time series of actual asset returns from time series that are generated synthetically via various processes, including AR1. In contrast with previous anecdotal evidence, they find that subjects can distinguish between the two. These results show that temporal charts of asset prices convey to investors information that cannot be reproduced by summary statistics. They also provide a first refutation based on human perception of a strong form of the efficient-market hypothesis. Their experiments are implemented via an online video game (http://arora.ccs.neu.edu). The authors also link the subjects’ performance to statistical properties of the data and investigate whether subjects improve performance while playing.TOPICS: Portfolio theory, statistical methods