Heterogeneity of Beliefs and Trading Behavior: A Reexamination

Combining experimental data sets from seven individual studies, including 255 asset markets with 2,031 participants, and 36,326 short-term price forecasts, we analyze the role of heterogeneity of beliefs in the organization of trading behavior by reproducing and reconsidering earlier experimental findings. Our results confirm prior evidence that price expectations affect trading behavior. However, heterogeneity in beliefs does not seem to drive overpricing and asset market bubbles, as suggested by earlier studies, and we find no indication of short-term beliefs being better determinants of trading behavior than longer-term beliefs.