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To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jebo.2006.05.004 Byline: Lucy F. Ackert (a)(b), Bryan K. Church (c), Ping Zhang (d) Keywords: Experimental asset markets; Optimistic forecast bias Abstract: This study uses experimental asset markets to investigate the effects of experience and common knowledge on a market's ability to adjust for optimistic forecast bias. As a baseline, we find that period-end prices reflect unbiased forecasts in markets with private information and inexperienced traders. With low bias forecasts, traders need experience before price adjusts for the bias. With high bias forecasts, traders need experience and public forecast releases before price adjusts for the bias. Overall, our findings provide insight into identifying conditions that are critical for the full revelation of biased, imperfect forecasts and provide direction for future theoretical work. Author Affiliation: (a) Department of Economics and Finance, Michael J. Coles College of Business, Kennesaw State University, Kennesaw, GA 30144, USA (b) Research Department, Federal Reserve Bank of Atlanta, 1000 Peachtree Street N.E., Atlanta, GA 30309-4470, USA. (c) College of Management, Georgia Tech, Atlanta, GA 30332-0520, USA (d) Rotman School of Management, 105 St. George Street, University of Toronto, Toronto, Ont., Canada M5S 3E6 Article History: Received 13 April 2004; Accepted 26 May 2006

The authors find that age affects portfolio decisions.

Twenty-seven markets are examined in three countries. The authors find no cultural difference, although better information is exhibited in market prices.

An analysis of the value of imperfect information on prices reveals that market prices are consistent with the Bayesian rule in 7 out of 12 cases and that the information is at least partly disseminated. Furthermore, the study reveals that imperfect information is given value by traders but to a lesser degree than the upper bound of information value thus providing evidence that the value of information is kept at reasonable price.