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KTO-OFCE-GREDEG Research seminar

Sébastien Duchêne (GREDEG) will present a paper titled: "Short selling and borrowing on market prices and traders' expectations"


This research studies the influence of borrowing and/or short selling on traders' price forecasts, trading behaviours and market outcomes in an experimental asset market. The novelty of this experiment is to conduct a 2X2 design to investigate these two leverages individually or in combination while eliciting long-term forecasts of market participants. Borrowing tends to increase price deviations, overvaluations or price fluctuations but also forecast deviations and forecast overvaluations, while short selling tends to reduce these characteristics. The combination of these two leverages produces greater belief dispersions between traders and also larger forecast deviations from prices. Besides, a major result highlighted that the main variability in traders' forecasts comes from the heterogeneities of subjects and markets within treatments. Finally, traders' orders and strategies differ according to treatments and cognitive abilities.

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