A robust Hansen-Sargent prediction formula
This paper derives a formula for the optimal forecast of a discounted sum of future values of a random variable. This problem reflects a preference for robustness in the presence of (unstructured) model uncertainty. The paper shows that revisions of a robust forecast are more sensitive to new information, and discusses the relevance of this result to previous findings of excess sensitivity of consumption and asset prices to new information.
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|Date of creation:||2000|
|Date of revision:|
|Publication status:||Published in Economics Letters (April 2001, v. 71 no. 1, p43-48)|
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Lars Peter Hansen & Thomas J. Sargent & Thomas D. Tallarini, 1999.
"Robust Permanent Income and Pricing,"
Review of Economic Studies,
Oxford University Press, vol. 66(4), pages 873-907.
- Lars Peter Hansen & Thomas J. Sargent & Thomas D. Tallarini Jr., 1997. "Robust Permanent Income and Pricing," Levine's Working Paper Archive 596, David K. Levine.
- Lars Hansen & Thomas Sargent & Thomas Tallarini, . "Robust Permanent Income and Pricing," GSIA Working Papers 1997-51, Carnegie Mellon University, Tepper School of Business.
- Robert J. Shiller, 1980.
"Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?,"
NBER Working Papers
0456, National Bureau of Economic Research, Inc.
- Shiller, Robert J, 1981. "Do Stock Prices Move Too Much to be Justified by Subsequent Changes in Dividends?," American Economic Review, American Economic Association, vol. 71(3), pages 421-36, June.
- Kasa, Kenneth, 2002.
"Model Uncertainty, Robust Policies, And The Value Of Commitment,"
Cambridge University Press, vol. 6(01), pages 145-166, February.
- Kenneth Kasa, 1999. "Model uncertainty, robust policies, and the value of commitment," Working Paper Series 99-14, Federal Reserve Bank of San Francisco.
- Hansen, Lars Peter & Sargent, Thomas J., 1981.
"A note on Wiener-Kolmogorov prediction formulas for rational expectations models,"
Elsevier, vol. 8(3), pages 255-260.
- Lars Peter Hansen & Thomas J. Sargent, 1981. "A note on Wiener-Kolmogorov prediction formulas for rational expectations models," Staff Report 69, Federal Reserve Bank of Minneapolis.
- Flavin, Marjorie A, 1981. "The Adjustment of Consumption to Changing Expectations about Future Income," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 974-1009, October.
- Lars Peter Hansen & Thomas J. Sargent, 1979.
"Formulating and estimating dynamic linear rational expectations models,"
127, Federal Reserve Bank of Minneapolis.
- Hansen, Lars Peter & Sargent, Thomas J., 1980. "Formulating and estimating dynamic linear rational expectations models," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 7-46, May.
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