The unbiasedness and efficiency tests of the rational expectations hypothesis
AbstractThis 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 InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 24114.
Date of creation: 10 Aug 2001
Date of revision: 11 Mar 2010
Rational expectations hypothesis; expectations; unbiasedness; efficiency; Box-Jenkins forecasting model;
Find related papers by JEL classification:
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
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- Laurence Ball & Dean Croushore, 1995.
"Expectations and the Effects of Monetary Policy,"
NBER Working Papers
5344, National Bureau of Economic Research, Inc.
- Laurence Ball & Dean Croushore, 1995. "Expectations and the effects of monetary policy," Working Papers 95-22, Federal Reserve Bank of Philadelphia.
- Laurence Ball & Dean Croushore, 2001. "Expectations and the effects of monetary policy," Working Papers 01-12, Federal Reserve Bank of Philadelphia.
- Laurence Ball & Dean Croushore, 1998. "Expectations and the effects of monetary policy," Working Papers 98-13, Federal Reserve Bank of Philadelphia.
- 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.
- 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.
- 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.
- 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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