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The unbiasedness and efficiency tests of the rational expectations hypothesis

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  • Bilgili, Faik

Abstract

This study examines the direct tests of the Rational Expectations Hypothesis (REH). Pesando (1975) employs the Livingston survey data of business economists and reaches the rejection of rationality and consistency but not rejection of the efficiency. Analyzing the same data, Carlson (1977) rejects these three hypotheses that Pesando tests when he uses expectations on CPI, but doesn’t reject hypotheses as he uses expectations on WPI. Turnovsky (1980) tests the unbiasedness property of the REH using Livingston data and finds different results for the different periods of data. Friedman (1980) applies the unbiasedness and efficiency tests using data of The Goldsmith-Nagan Bond and Money Market Letter and reaches mixed results for the REH. Ball and Croushore (1995) use the several survey results and univariate forecasting models. Their results provide a strong rejection of the REH.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 24114.

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Date of creation: 10 Aug 2001
Date of revision: 11 Mar 2010
Handle: RePEc:pra:mprapa:24114

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Keywords: Rational expectations hypothesis; expectations; unbiasedness; efficiency; Box-Jenkins forecasting model;

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References

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  1. Laurence Ball & Dean Croushore, 1995. "Expectations and the Effects of Monetary Policy," NBER Working Papers 5344, National Bureau of Economic Research, Inc.
  2. 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.
  3. Pesando, James E, 1975. "A Note on the Rationality of the Livingston Price Expectations," Journal of Political Economy, University of Chicago Press, vol. 83(4), pages 849-58, August.
  4. Pearce, Douglas K, 1979. "Comparing Survey and Rational Measures of Expected Inflation: Forecast Performance and Interest Rate Effects," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 11(4), pages 447-56, November.
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Cited by:
  1. Bilgili, Faik, 2006. "Random walk, excess smoothness or excess sensitivity? Evidence from literature and an application for Turkish economy," MPRA Paper 24086, University Library of Munich, Germany, revised 14 Jul 2010.

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