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Expectations Formation and Risk in Three Financial Markets: Surveying What the Surveys Say

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  • Ronald MacDonald

Abstract

This paper attempts to provide a logical overview of the literature which exploits survey data to examine issues of expectations formation and risk aversion in financial markets. Our survey suggests that: short term expectations are excessively volatile and exhibit bandwagon effects, while longer term expectations appear to be regressive and therefore stabilising; in bond and foreign exchange markets the standard result of forward rate biasedness is due in part to time‐varying premia; recent research using disaggregate foreign exchange survey data demonstrates the importance of heterogeneous expectations.

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  • Ronald MacDonald, 2000. "Expectations Formation and Risk in Three Financial Markets: Surveying What the Surveys Say," Journal of Economic Surveys, Wiley Blackwell, vol. 14(1), pages 69-100, February.
  • Handle: RePEc:bla:jecsur:v:14:y:2000:i:1:p:69-100
    DOI: 10.1111/1467-6419.00105
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