Correlation Neglect in Belief Formation

Benjamin Enke, Florian Zimmermann (Dept. of Economics, Institute for Applied Macroeconomics, Bonn, Germany)

  • In markets where individual choice is aggregated based on information, how are the results affected by correlated information?
  • Are beliefs distorted by individuals who fail to take into account correlation, and who infer too much from highly correlated information, thus leading to excessive optimism or pessimism?
  • Read the research results