Yu, Ge (2003): Comparing Expectations and Outcomes: Application to UK Data.
Download (441kB) | Preview
The validity of the rational expectations hypothesis is explored using 12 years direct individual expectations data derived from the BHPS. The usage of micro data drives off the possibility of spurious rejections caused by the existence of micro-heterogeneity. And the 12 years BHPS micro panel data can release the average-out problem in a comparatively short term micro panel data. In short, I test if the individual expectations are unbiased and efficient in a comparatively long term in this paper. As a result, expectations errors are found to be biased and inefficient. Furthermore, the hypothesis that expectations errors are random is investigated by exploring the existence of systematic components in expectations errors. There exists the micro-heterogeneity among different types of respondents. Also, the factors that significantly affect individual’s expectations are identified.
|Item Type:||MPRA Paper|
|Original Title:||Comparing Expectations and Outcomes: Application to UK Data|
|Keywords:||rational expectations; systematic heterogeneity; forecast errors; rational expectations hypothesis; subjective|
|Subjects:||E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E13 - Neoclassical
E - Macroeconomics and Monetary Economics > E2 - Macroeconomics: Consumption, Saving, Production, Employment, and Investment
E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E17 - Forecasting and Simulation: Models and Applications
|Depositing User:||Ge YU|
|Date Deposited:||18. Oct 2006|
|Last Modified:||14. Feb 2013 07:29|
1. Alessie, R., A.Lusardi. "Saving and Income Smoothing: Evidence from Panel Data." European Economic Review, 1996, 41 1251-1279.
2. Arrow, K. "The Future and the Present in Economic Life." The Economic Enquiry, 1987.
3. Arulampalam, W., Booth, A. L., Taylor, M. P. "Unemployment Persistence." Oxford Economic Papers, 2000, 52 (1), 24-50.
4. Attanasio, O., Davis, S. "Relative Wage Movements and the Distribution of Consumption." Journal of Political Economy, 1996, 104 (6), 1227-1262.
5. Attfield G, Demery D, Duck N. Rational Expectations in Macroeconomics. 1985.
6. Barskey, R. B., F.T.Juster, M.S.Kimball, M.D.Shapiro. "Preference Parameters and Behavioural Heterogeneity: An Experimental Approach in the Health and Retirement Study." Quarterly Journal of Economics, 1997, 112 537-579.
7. Batchelor, R. "Quantitative v. Qualitative Measures of Inflation Expectations." Oxford Bulletin of Economic and Statistics, 1986, 48 99-120.
8. Batchelor, R., Jonung, L. "Cross-Sectional Evidence on the Rationality of the Mean and Variance of Inflation Expectations," Grunert, Klaus G., Understanding Economic Behavior. Boston: Kluwer press, 1989, 93-105.
9. Bonham, C. S., Cohen, R. H. "To Aggregate, Pool or Neither: Testing the Rational-Expectations Hypothesis Using Survey Data." Journal of Business & Economic Statistics, 2001, 19.
10. Cambell, A., Converse, P. E., Rodgers, W. L. The Quality of American Life. New York: Sage, 1976.
11. Chamberlain, Gary. "Panel Data," Zvi Griliches, Michael D.Intriligator, Handbook of Economietrics. Amsterdam: North-Holland, 1984.
12. Cutler, D., Katz, L. "Macroeconomic Performance and the Disadvantaged." Brookings Papers on Economic Activity, 1991, 0 (2), 1-61.
13. Das, M., Dominitz J., van Soest, A. "Comparing Predictions and Outcomes: Theory and Application to Income Changes." Journal of the American Statistical Association, 1999, 94 75-85.
14. Das, M., van Soest, A. "A Panel Data Model for Subjective Information on Household Income Growth." CentER Discussion Paper, 1996, 9675.
15. Dominitz, J., Manski, C. F. "Using Expectations Data to Study Subjective Income Expectations." Journal of the American Statistical Association, 1997, 92 855-867.
16. Donkers, B., B.Melenberg, A.van Soest. "Estimating Risk Attitudes Using Lotteries, A Large Sample Approach." CentER Discussion Paper 9012, 1999.
17. Friedman, B. "Optimal Expectations and the Extreme Information Assumptions of Rational Expectations Macromodels." Journal of Monetary Economics, 1979.
18. Gramlich, E. "Models of Inflation Expectations Formation." Journal of Money, Credit,and Banking, 1983, 15 155-173.
19. Guiso, L., Jappelli, T., Terlizzese, D. "Earnings Uncertainty and Precautionary Saving." Journal of Monetary Economics, 1992, 30 307-337.
20. Hochguertel, S. Households' Portfolio Choices. 1998. Tilburg University.
Ref Type: Thesis/Dissertation
21. Ivaldi, M. "Survey Evidence on the Rationality of Expectations." Journal of Applied Econometrics, 1992, 7 225-241.
22. Keane, M. P., Runkle, D. E. "Testing the Rationality of Price Forecasts: New Evidence From Panel Data." American Economic Review, 1990, 80 714-735.
23. Maddala, G., Fishe, R., Lahiri, K. "A Time Series Analysis of Popular Expectations Data," Zellner, A., Applied Time Series Analysis of Economic Data. U.S.: Department of Commerce, 1981, 278-290.
24. Mishkin, F. A Rational Expectations Approach to Macroeconomics. 1983.
25. Muth, J. "Rational Expectations and the Theory of Price Movements." Econometrica, 1961.
26. Nerlove, M., T.Schuermann. "Expectations: Are They Rational, Adaptive, or Naive? An Essay in Simulation-based Inference," G.S.Maddala, P.Phillips, C.R.Rao, Advances in Econometrics and Quantitative Economics. Oxford: Balckwell, 1995, 354-381.
27. Nerlove, M., T.Schuermann. "Businessmen's Expectations Are Neither Rational nor Adaptive." ZEW Discussion paper 1997-1, 1997.
28. Simon, H. "Rationality as Process and as Product of Thought." American Economic Review, 1978.
29. Souleles, Nicholas S. "Consumer Sentiment: Its Rationality and Usefulness in Forecasting Expenditure - Evidence from the Michigan Micro Data." NBER Working Papers, 2001, 8410.