How price charts affect stock price forecasts

Abstract

This experimental paper exhibits how price paths affect forecasting behaviour. In a setting of various charts subjects make predictions. I find that trend continuation and mean reversion are among the major emerging pattern and that the use of price paths that differ in their time frame can lead to significantly different forecasts. Furthermore, I infer that most of those intuition afflicted decisions that result in pattern can mostly be linked to the anchor and representativeness heuristic, in which subjects take past price movements as indicative for future ones. This paper thus gathers the pattern that surface when individuals are tasked with stock price forecasting and explores the differences in forecasting pattern that arise from different price paths.