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Price expectations in goods and financial markets

Author

Listed:
  • Georges Prat

    (MDEM - Modélisation de la dynamique économique et monetaire - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • François Gardes

    (CERMSEM - CEntre de Recherche en Mathématiques, Statistique et Économie Mathématique - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

Four main lessons stem from the works presented in this volume. First, the rational expectation hypothesis has to go thoroughly into more general concepts. If the REH in a muthian sense seems now invalidated, this result does not mean that there is not rationality in price expectations : in the one hand, expectations may be economically rational in the sense of the advantage-cost analysis, and, in the other hand, the exchange of informations between agents through the market may involve some other types of rationalities. Secondly, it appears important to respect the individual nature of expectations both at the theoretical and empirical levels : generally, the heterogeneity is not neutral either for reaching an economic equilibrium or for econometrical estimations of expectational processes. Thirdly, expectational behaviors change over time ; both the processes and the parameters which intervene in these processes are changing. Fourthly, while expectational processes are rather extrapolative (destabilizing) when the horizon is short (less or equal to one month), they are rather regressive (stabilizing) when the horizon is long (greater than one month).

Suggested Citation

  • Georges Prat & François Gardes, 2000. "Price expectations in goods and financial markets," Post-Print halshs-00172996, HAL.
    • Handle: RePEc:hal:journl:halshs-00172996
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    Cited by:

    1. Benassy-Quere, Agnes & Larribeau, Sophie & MacDonald, Ronald, 2003. "Models of exchange rate expectations: how much heterogeneity?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 13(2), pages 113-136, April.
    2. Georges Prat & Remzi Uctum, 2015. "Expectation formation in the foreign exchange market: a time-varying heterogeneity approach using survey data," Applied Economics, Taylor & Francis Journals, vol. 47(34-35), pages 3673-3695, July.
    3. Georges Prat & David Le Bris, 2019. "Equity Risk Premium and Time Horizon: what do the French secular data say ?," Working Papers hal-04141877, HAL.
    4. Prat, Georges & Uctum, Remzi, 2011. "Modelling oil price expectations: Evidence from survey data," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(3), pages 236-247, June.
    5. Georges Prat & Remzi Uctum, 2016. "Do markets learn to rationally expect US interest rates? Evidence from survey data," Post-Print hal-01411824, HAL.
    6. Prat, Georges, 2013. "Equity risk premium and time horizon: What do the U.S. secular data say?," Economic Modelling, Elsevier, vol. 34(C), pages 76-88.
    7. Prat, Georges & Uctum, Remzi, 2013. "Modeling the horizon-dependent ex-ante risk premium in the foreign exchange market: Evidence from survey data," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 23(C), pages 33-54.
    8. Fredj Jawadi & Georges Prat, 2017. "Equity prices and fundamentals: a DDM–APT mixed approach," Review of Quantitative Finance and Accounting, Springer, vol. 49(3), pages 661-695, October.
    9. Georges Prat & Remzi Uctum, 2012. "Modeling the horizon-dependent risk premium in the forex market: evidence from survey data," EconomiX Working Papers 2012-29, University of Paris Nanterre, EconomiX.
    10. Alain Abou & Georges Prat, 1986. "Ex-ante risk premia in the US stock market: analysing experts' behaviour at the individual level," Post-Print halshs-00172883, HAL.
    11. Georges Prat & David Le Bris, 2019. "Equity Risk Premium and Time Horizon: what do the French secular data say ?," EconomiX Working Papers 2019-8, University of Paris Nanterre, EconomiX.
    12. Georges Prat & Remzi Uctum, 2006. "Economically rational expectations theory: evidence from the WTI oil price survey data," Post-Print halshs-00173113, HAL.
    13. Georges Prat & Remzi Uctum, 2010. "Anticipations, prime de risque et structure par terme des taux d'intérêt : une analyse des comportements d'experts," Recherches économiques de Louvain, De Boeck Université, vol. 76(2), pages 195-217.
    14. Richard H. Cohen & Carl Bonham, 2007. "Specifying the Forecast Generating Process for Exchange Rate Survey Forecasts," Working Papers 200718, University of Hawaii at Manoa, Department of Economics.
    15. Prat, Georges & Uctum, Remzi, 2021. "Term structure of interest rates: Modelling the risk premium using a two horizons framework," Journal of Economic Behavior & Organization, Elsevier, vol. 182(C), pages 421-436.
    16. Christian Dreger & Georg Stadtmann, 2008. "What drives heterogeneity in foreign exchange rate expectations: insights from a new survey," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 13(4), pages 360-367.
    17. Christian Dreger & Georg Stadtmann, 2006. "What Drives Heterogeneity in Foreign Exchange Rate Expectations: Deep Insights from a New Survey," Discussion Papers of DIW Berlin 624, DIW Berlin, German Institute for Economic Research.
    18. Georges Prat & Remzi Uctum, 2007. "Switching between Expectation Processes in the Foreign Exchange Market: a Probabilistic Approach using Survey Data," Review of International Economics, Wiley Blackwell, vol. 15(4), pages 700-719, September.

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