Do husbands’ and wives’ predictions irrationally diverge?

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Do husbands’ and wives’ predictions irrationally diverge?

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GIAMBONI LUIGI

Abstract

This paper proposes a new version of the orthogonality test where, the difference of spouses’ predictions over total net family income is regressed on variables that are common knowledge between the two. The test is consistent for the linex (and lin-lin) class of asymmetric loss functions and is immune to Chamberlain’s critique, of tests with short panels. The null of rational expectations formation is rejected by both the standard and the new orthogonality tests. Interestingly, my estimated degree of asymmetry, is close to a quadratic loss function.(JEL classification: C53, E47)

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Paper provided by Tor Vergata University, CEIS in its series Departmental Working Papers with number 203.

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Date of creation: Apr 2004
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Handle: RePEc:rtv:ceiswp:203

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This paper has been announced in the following NEP Reports:

NEP-ALL-2005-03-06 (All new papers)

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repec:cup:etheor:v:13:y:1997:i:6:p:808-17 is not listed on IDEAS
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