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Are Market Forecasts Rational?


  • Frederic S. Mishkin


This paper conducts tests of the rationality of both inflation and short-term interest rate forecasts in the bond market. These tests are developed with the theory of efficient markets and make use of security price data to infer information on market expectations.

Suggested Citation

  • Frederic S. Mishkin, 1980. "Are Market Forecasts Rational?," NBER Working Papers 0507, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:0507
    Note: EFG

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    References listed on IDEAS

    1. Barro, Robert J, 1977. "Unanticipated Money Growth and Unemployment in the United States," American Economic Review, American Economic Association, vol. 67(2), pages 101-115, March.
    2. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
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    Cited by:

    1. Ivana Komunjer & Michael T. Owyang, 2012. "Multivariate Forecast Evaluation and Rationality Testing," The Review of Economics and Statistics, MIT Press, vol. 94(4), pages 1066-1080, November.
    2. Capistrán, Carlos, 2008. "Bias in Federal Reserve inflation forecasts: Is the Federal Reserve irrational or just cautious?," Journal of Monetary Economics, Elsevier, vol. 55(8), pages 1415-1427, November.
    3. William D. Nordhaus & Steven N. Durlauf, 1984. "Empirical Tests of the Rationality of Economic Forecasters: A Fixed Horizons Approach," Cowles Foundation Discussion Papers 717R, Cowles Foundation for Research in Economics, Yale University, revised May 1985.
    4. Graham Elliott & Ivana Komunjer & Allan Timmermann, 2008. "Biases in Macroeconomic Forecasts: Irrationality or Asymmetric Loss?," Journal of the European Economic Association, MIT Press, vol. 6(1), pages 122-157, March.
    5. Michał Markun & Anna Mospan, 2015. "Stationarity and persistence of the term premia in the Polish money market," NBP Working Papers 227, Narodowy Bank Polski, Economic Research Department.
    6. Elliott, Graham & Komunjer, Ivana & Timmermann, Allan G, 2003. "Estimating Loss Function Parameters," CEPR Discussion Papers 3821, C.E.P.R. Discussion Papers.
    7. Campbell, Sean D. & Sharpe, Steven A., 2009. "Anchoring Bias in Consensus Forecasts and Its Effect on Market Prices," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 44(02), pages 369-390, April.
    8. Georges Prat, 1994. "La formation des anticipations boursières," Économie et Prévision, Programme National Persée, pages 101-125.
    9. Taipalus, Katja, 2012. "Detecting asset price bubbles with time-series methods," Scientific Monographs, Bank of Finland, number 2012_047, November.
    10. Kim, Don H. & Orphanides, Athanasios, 2012. "Term Structure Estimation with Survey Data on Interest Rate Forecasts," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 47(01), pages 241-272, April.
    11. Huizinga, John & Mishkin, Frederic S, 1984. " Inflation and Real Interest Rates on Assets with Different Risk Characteristics," Journal of Finance, American Finance Association, vol. 39(3), pages 699-712, July.
    12. Victor Zarnowitz, 1984. "Business Cycles Analysis and Expectational Survey Data," NBER Working Papers 1378, National Bureau of Economic Research, Inc.
    13. Auguste Mpacko Priso, 1998. "Une évaluation de l'importance des anticipations boursières des experts," Économie et Prévision, Programme National Persée, vol. 136(5), pages 49-61.
    14. Georganas, Sotiris & Healy, Paul J. & Li, Nan, 2014. "Frequency bias in consumers׳ perceptions of inflation: An experimental study," European Economic Review, Elsevier, vol. 67(C), pages 144-158.
    15. Wilfred Amaldoss & Sanjay Jain, 2002. "An Analysis of the Impact of Social Factors on Purchase Behavior," Review of Marketing Science Working Papers 2-1-1021, Berkeley Electronic Press.
    16. Patton, Andrew J & Timmermann, Allan G, 2003. "Properties of Optimal Forecasts," CEPR Discussion Papers 4037, C.E.P.R. Discussion Papers.
    17. Taipalus, Katja, 2006. "Bubbles in the Finnish and US equities markets," Scientific Monographs, Bank of Finland, number 35/2006, November.

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