Title: How Do Markets and Individuals Respond to New Information?

Speaker: Daniel Zizzo, Dean, School of Economics, The University of Queensland, Australia; Professor of Economics. His research field is experimental and behavioral economics. He has published dozens of papers in top international journals such as "American Economic Review", "European Economic Review" and "Games and Economic Behavior".

Abstract: We conduct a laboratory economic experiment to compare the responses of individuals and markets to new information. Specifically, we ask the same participants to state beliefs in an individual task and to trade in a double auction financial market in response to structurally identical information flows. We model the representative agent of individuals and markets using a double-hurdle model, in which agents first decide whether to change their beliefs and, if so, by how much. We find evidence of belief conservatism at the individual level, with one-third of individuals exhibiting at least some degree of conservatism; when beliefs change, they change by only about half of what is warranted. somewhat surprisingly, we find that the belief conservatism of the market’s representative agent is at least as strong or stronger; even accounting for the band of random noise in prices, price changes are only about one-fifth of what they should be. We propose a new test of whether individual characteristics can predict market-level behavior modeled by the market’s representative agent. Traders’ individual propensity to change beliefs is uncorrelated with that of the market’s representative agent. Our results suggest that belief conservatism bias is robust in a financial market setting and that average individual psychological parameters may not map directly into the representative agent paradigm adopted in mainstream macroeconomics.

Date & time: 16 September 2025, 15:00-16:30

Venue: B321, Zhixin Building, Central Campus, Shandong University