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Author:Ackert, Lucy F. 

Journal Article
Evidence on the efficiency of index options markets

Index options have been one of the most successful of the many innovative financial instruments introduced over the last few decades, as their high trading volume indicates. Given their prominence, the pricing efficiency of these markets is of great importance. ; Detecting inefficient pricing, or mispricing, requires comparing a theoretically efficient price with prices of options traded in financial markets. One popular approach to deriving pricing relationships is based on a principle called no-arbitrage, which simply assumes that arbitrageurs enter the market and quickly eliminate ...
Economic Review , Volume 85 , Issue Q1 , Pages 40-51

Working Paper
Tests of a simple optimizing model of daily price limits on futures contracts

FRB Atlanta Working Paper , Paper 89-10

Journal Article
Emotion and financial markets

Psychologists and economists hold vastly different views about human behavior. Psychologists contend that economists' models bear little relation to actual behavior. This view is supported by a large body of psychological research that shows that emotional state can significantly affect decision making. ; Economists, on the other hand, argue that psychological studies have no theoretical basis and offer little empirical evidence about people's decision-making processes. The reigning financial economics paradigm-the efficient market hypothesis (EMH)-assumes that individuals make rational ...
Economic Review , Volume 88 , Issue Q2 , Pages 33-41

Working Paper
A simultaneous equations analysis of analysts’ forecast bias and institutional ownership

In this paper we use a simultaneous equations model to examine the relationship between analysts' forecasting decisions and institutions' investment decisions. Neglecting their interaction results in model misspecification. We find that analysts' optimism concerning a firm's earnings responds positively to changes in the number of institutions holding the firm's stock. At the same time, institutional demand responds positively to increases in analysts' optimism. We also investigate several firm characteristics as determinants of analysts' and institutions' decisions. We conclude that ...
FRB Atlanta Working Paper , Paper 2000-5

Working Paper
Bid-ask spreads in multiple dealer settings: Some experimental evidence

We report the results of an experiment designed to investigate the behavior of quoted spreads in multiple-dealer markets. We manipulate verbal communication (not allowed and allowed) and order preferencing (not allowed, allowed, and allowed with order-flow payment) between eighteen sessions. Without preferencing, spreads are wider when communication is allowed. With preferencing (and no order-flow payments), individuals do not have incentives to narrow the spread and a wide spread may be maintained without a collusive agreement. However, spreads narrow somewhat when individuals are given the ...
FRB Atlanta Working Paper , Paper 98-9

Working Paper
The effects of subject pool and design experience on rationality in experimental asset markets

Empirical evidence suggests that prices do not always reflect fundamental values and individual behavior is often inconsistent with rational expectations theory. We report the results of fourteen experimental markets designed to examine whether the interactive effect of subject pool and design experience tempers price bubbles and improves forecasting ability. Our main findings are: (i) price run-ups are modest and dissipate quickly when traders are knowledgeable about financial markets and have design experience; (ii) price bubbles moderate quickly when only a subset of traders are ...
FRB Atlanta Working Paper , Paper 98-18

Working Paper
Tax policy design in the presence of social preferences: some experimental evidence

This paper reports the results of experiments designed to examine whether a taste for fairness affects people?s preferred tax structure. Building on the Fehr and Schmidt (1999) model, we devise a simple test for the presence of social preferences in voting for alternative tax structures. The experimental results show that individuals demonstrate concern for their own payoff and inequality aversion in choosing among alternative tax structures. However, concern for redistribution decreases when it leads to increasing deadweight losses. Our findings have important implications for the design of ...
FRB Atlanta Working Paper , Paper 2004-33

Journal Article
Business cycles and analysts' forecasts: further evidence of rationality

Economic Review , Issue Nov , Pages 13-22

Working Paper
When the shoe is on the other foot: experimental evidence on evaluation disparities

Research provides evidence that the method chosen to elicit value has an important effect on a person?s valuation. We hypothesize that role has a crucial effect on decision makers? elicited values: Buyers prefer to pay less and sellers prefer to collect more. We conduct experimental sessions and replicate the disparity between willingness to pay and willingness to accept. We conduct additional sessions in which role is stripped away: Endowed decision makers provide values that are used to determine a price at which anonymous others transact. Importantly, decision makers? earnings in the ...
FRB Atlanta Working Paper , Paper 2005-17

Working Paper
Intrinsic bubbles: the case of stock prices: a comment

Some recent empirical evidence suggests that stock prices are not properly modelled as the present discounted value of expected dividends and that empirical models incorporating nonlinear bubble components better fit the data. In this paper we show that the nonlinearity in the relationship between prices and dividends may arise from how managers choose dividend payout. In particular, we propose a model of managed dividends which can explain observed long-term trends in stock prices. This model of managed dividends is shown to be observationally equivalent to the popular intrinsic bubbles ...
Working Paper Series , Paper WP-99-26