Strategic Withholding and Imprecision in Asset Measurement

Strategic Withholding through Production Failures

Anecdotal evidence indicates that electricity producers use production failures to disguise strategic reductions of capacity in order to influence prices, but systematic evidence is lacking. We use a quasi-experimental set up and data from the Swedish energy market to examine such behavior. In a market without strategic withholding, the decision of reporting a failure should be independent of t...

Strategic Uncertainty in Asset Markets

We develop a noisy rational expectations equilibrium model of asset prices with informed and uninformed investors. In our model, informed investors affect the asset’s dividend payoff through their investment, thus have coordination incentives. They receive heterogenous private signals about the asset’s fundamental value and observe its price. The uninformed investors observe only the price. The...

Making HR a Strategic Asset

Strategic Uncertainty in an Experimental Asset Market

To what extent is the observed mis-pricing in experimental asset markets caused by strategic uncertainty (SU) and by individual bounded rationality (IBR)? We address this question by comparing subjects initial price forecasts in two market environments – one with six human traders, and the other with one human and five computer traders. We find that both SU and IBR account equally for the media...

Momentum and Mean Reversion in Strategic Asset Allocation

We study a dynamic asset allocation problem in which expected stock returns are predictable, focusing on an investor with a medium-term horizon of up to five years. At these horizons, both return continuation (momentum) and mean-reversion are of central importance in the asset allocation problem. Researchers have extensively investigated the impact of mean-reversion on optimal portfolio choice,...