Advanced Search
MyIDEAS: Login to save this paper or follow this series

To Aggregate, Pool, or Neither: Testing the Rational Expectations Hypothesis Using Survey Data

Contents:

Author Info

  • Carl S Bonham

    ()
    (Department of Economics, University of Hawaii at Manoa)

  • Richard H Cohen

Abstract

It is well known that even if all forecasters are rational, estimated coefficients in unbiasedness regressions using consensus forecasts are inconsistent because forecasters have private information. However, if all forecasters face a common realization, pooled estimators are also inconsistent. In contrast, we show that when predictions and realizations are integrated and cointegrated, micro-homogeneity ensures that consensus and pooled estimators are consistent. Therefore, contrary to claims in the literature, in the absence of micro-homogeneity, pooling is not a solution to the aggregation problem. We reject micro-homogeneity for a number of forecasts from the Survey of Professional Forecasters. Therefore, for these variables unbiasedness can only be tested at the individual level.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.economics.hawaii.edu/research/workingpapers/003.pdf
File Function: First version, 2000
Download Restriction: no

Bibliographic Info

Paper provided by University of Hawaii at Manoa, Department of Economics in its series Working Papers with number 200003.

as in new window
Length: 36 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:hai:wpaper:200003

Contact details of provider:
Postal: 2424 Maile Way, Honolulu, HI 96822
Phone: (808)956-8730
Fax: (808)956-4347
Email:
Web page: http://www.economics.hawaii.edu/
More information through EDIRC

Order Information:
Email:
Web: http://www.economics.hawaii.edu/research/working.html

Related research

Keywords: Rational Expectations; Micro-homogeneity; Heterogeneity Bias; Aggregation Bias; Survey Forecasts;

Other versions of this item:

References

References listed on IDEAS
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.:
as in new window
  1. Lovell, Michael C, 1986. "Tests of the Rational Expectations Hypothesis," American Economic Review, American Economic Association, vol. 76(1), pages 110-24, March.
  2. West, Kenneth D, 1988. "Asymptotic Normality, When Regressors Have a Unit Root," Econometrica, Econometric Society, vol. 56(6), pages 1397-1417, November.
  3. Ito, Takatoshi, 1990. "Foreign Exchange Rate Expectations: Micro Survey Data," American Economic Review, American Economic Association, vol. 80(3), pages 434-49, June.
  4. Batchelor, Roy & Dua, Pami, 1991. "Blue Chip Rationality Tests," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(4), pages 692-705, November.
  5. Kolb, R. A. & Stekler, H. O., 1996. "Is there a consensus among financial forecasters?," International Journal of Forecasting, Elsevier, vol. 12(4), pages 455-464, December.
  6. Dean Croushore, 1993. "Introducing: the survey of professional forecasters," Business Review, Federal Reserve Bank of Philadelphia, issue Nov, pages 3-15.
  7. Thomas Urich & Paul Wachtel, 1983. "The Structure of Expectations of the Weekly Money Supply Announcement," NBER Working Papers 1090, National Bureau of Economic Research, Inc.
  8. Pearce, Douglas K, 1984. "An Empirical Analysis of Expected Stock Price Movements," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(3), pages 317-27, August.
  9. Carl Bonham & Richard Cohen, 1992. "The Rationality of Price Level Forecasts: Correct Tests Using Micro Data," Working Papers 199204, University of Hawaii at Manoa, Department of Economics.
  10. Hansen, Lars Peter, 1982. "Large Sample Properties of Generalized Method of Moments Estimators," Econometrica, Econometric Society, vol. 50(4), pages 1029-54, July.
  11. Figlewski, Stephen & Wachtel, Paul, 1981. "The Formation of Inflationary Expectations," The Review of Economics and Statistics, MIT Press, vol. 63(1), pages 1-10, February.
  12. Peter C.B. Phillips & Hyungsik R. Moon, 1999. "Linear Regression Limit Theory for Nonstationary Panel Data," Cowles Foundation Discussion Papers 1222, Cowles Foundation for Research in Economics, Yale University.
  13. Granger, Clive W J, 1986. "Developments in the Study of Cointegrated Economic Variables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 213-28, August.
  14. Zarnowitz, Victor, 1985. "Rational Expectations and Macroeconomic Forecasts," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(4), pages 293-311, October.
  15. Hendry, David F, 1980. "Econometrics-Alchemy or Science?," Economica, London School of Economics and Political Science, vol. 47(188), pages 387-406, November.
  16. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
  17. Clemen, Robert T., 1989. "Combining forecasts: A review and annotated bibliography," International Journal of Forecasting, Elsevier, vol. 5(4), pages 559-583.
  18. Davies, Anthony & Lahiri, Kajal, 1995. "A new framework for analyzing survey forecasts using three-dimensional panel data," Journal of Econometrics, Elsevier, vol. 68(1), pages 205-227, July.
  19. Keane, Michael P & Runkle, David E, 1990. "Testing the Rationality of Price Forecasts: New Evidence from Panel Data," American Economic Review, American Economic Association, vol. 80(4), pages 714-35, September.
  20. Stock, James H, 1987. "Asymptotic Properties of Least Squares Estimators of Cointegrating Vectors," Econometrica, Econometric Society, vol. 55(5), pages 1035-56, September.
  21. Schwert, G. William, 1987. "Effects of model specification on tests for unit roots in macroeconomic data," Journal of Monetary Economics, Elsevier, vol. 20(1), pages 73-103, July.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:hai:wpaper:200003. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Web Technician).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.