On the power of direct tests for rational expectations against the alternative of constant gain learning
AbstractIn this paper we study the power of direct tests for rational expectations against the constant gain learning alternative. The investigation is by means of a Monte Carlo study. The tests considered use quantitative expectations data and qualitative survey data that has been quantified. The main finding is that the power of tests for rational expectations against constant gain learning may be very small, making it impossible to distinguish the hypotheses.
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Bibliographic InfoArticle provided by National Bank of Poland, Economic Institute in its journal Bank i Kredyt.
Volume (Year): 41 (2010)
Issue (Month): 6 ()
Note: Support from the EU Commission through MRTN-CT-2006-034270 COMISEF is gratefully acknowledged. The authors would like to thank two anonymous referees for comments and suggestions which helped to improve this paper.
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More information through EDIRC
adaptive learning; tests for rational expectations; quantification methods; constant gain least squares;
Find related papers by JEL classification:
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Smith, Jeremy & McAleer, Michael, 1995.
"Alternative Procedures for Converting Qualitative Response Data to Quantitative Expectations: An Application to Australian Manufacturing,"
Journal of Applied Econometrics,
John Wiley & Sons, Ltd., vol. 10(2), pages 165-85, April-Jun.
- McAleer, M. & Smith, J., 1990. "Alternative Procedures for Converting Qualitative Response Data to Quantitative Expectations: An Application to Australian Manufacturing," Papers 219, Australian National University - Department of Economics.
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