Survey Evidence on the Rationality of Business Expectations: Implications from the Malaysian Agricultural Sector
The rational expectations hypothesis (REH) serves as an appealing mechanism in forming expectations compared to that of extrapolative or adaptive frameworks because of its consistency with the basic principles of maximizing behavior. This argument is particularly true as the basic idea of REH maintains that expectations in an uncertain world are formed under assumptions where no systematic errors and information are fully utilized. However, empirical findings from the present study showed diverse evidence of rationality in business operational forecasts formed by Malaysian agriculture firms, as capital expenditure expectations were found to be irrational but gross revenue expectations were supportive of the REH proposition. This implies that the survey of business forecasts may not work well in reflecting the true business outlook, specifically in value-related operational forecasts, which in turn would directly influence investment decisions as well as the capital budgeting process.
|Date of creation:||Dec 2011|
|Date of revision:|
|Publication status:||Published in Economic Computation and Economic Cybernetics Studies and Research 4.45(2011): pp. 169-180|
|Contact details of provider:|| Postal: |
Web page: http://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
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.:
- Forsells, Magnus & Kenny, Geoff, 2002. "The rationality of consumers' inflation expectations: survey-based evidence for the euro area," Working Paper Series 0163, European Central Bank.
- Dwyer, Gerald P, Jr, et al, 1993.
"Tests of Rational Expectations in a Stark Setting,"
Royal Economic Society, vol. 103(418), pages 586-601, May.
- Granger, Clive W J, 1986. "Developments in the Study of Cointegrated Economic Variables," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 213-28, August.
- Levine, David I, 1993. "Do Corporate Executives Have Rational Expectations?," The Journal of Business, University of Chicago Press, vol. 66(2), pages 271-93, April.
- Mitchell, Karlyn & Pearce, Douglas K., 2007.
"Professional forecasts of interest rates and exchange rates: Evidence from the Wall Street Journal's panel of economists,"
Journal of Macroeconomics,
Elsevier, vol. 29(4), pages 840-854, December.
- Karlyn Mitchell & Douglas K. Pearce, 2004. "Professional Forecasts of Interest Rates and Exchange Rates: Evidence from the Wall Street Journal's Panel of Economists," Working Paper Series 004, North Carolina State University, Department of Economics.
- Dominguez, Kathryn M., 1986.
"Are foreign exchange forecasts rational? : New evidence from survey data,"
Elsevier, vol. 21(3), pages 277-281.
- Kathryn M. Dominguez, 1986. "Are foreign exchange forecasts rational? New evidence from survey data," International Finance Discussion Papers 281, Board of Governors of the Federal Reserve System (U.S.).
- Evans, George & Gulamani, Riyaz, 1984. "Tests for Rationality of the Carlson-Parkin Inflation Expectations Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 46(1), pages 1-19, February.
- James G. MacKinnon, 1995.
"Numerical Distribution Functions for Unit Root and Cointegration Tests,"
918, Queen's University, Department of Economics.
- MacKinnon, James G, 1996. "Numerical Distribution Functions for Unit Root and Cointegration Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(6), pages 601-18, Nov.-Dec..
- E. Douglas Beach & Jorge Fernandez-Cornej & Noel D. Uri, 1995. "Testing the rational expectations hypothesis using survey data from vegetable growers in the USA," Journal of Economic Studies, Emerald Group Publishing, vol. 22(6), pages 46-59, October.
- Francisco Craveiro Dias & Cláudia Duarte & António Rua, 2008.
"Inflation expectations in the euro area: Are consumers rational?,"
w200823, Banco de Portugal, Economics and Research Department.
- Francisco Dias & Cláudia Duarte & António Rua, 2010. "Inflation expectations in the euro area: are consumers rational?," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 146(3), pages 591-607, September.
- Michael P. Keane & David E. Runkle, 1989. "Are economic forecasts rational?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 26-33.
- Benjamin M. Friedman, 1980. "Survey Evidence on The Rationality of Interest Rate Expectations," NBER Working Papers 0261, National Bureau of Economic Research, Inc.
- Fischer, Andreas M, 1989. "Unit Roots and Survey Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 51(4), pages 451-63, November.
- Feng Gao & Fengming Song & Jun Wang, 2008. "Rational or irrational expectations? Evidence from China's stock market," Journal of Risk Finance, Emerald Group Publishing, vol. 9(5), pages 432-448, November.
- William P. Osterberg, 2000. "New results on the rationality of survey measures of exchange-rate expectations," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 14-21.
- Mullineaux, Donald J, 1978. "On Testing for Rationality: Another Look at the Livingston Price Expectations Data," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages 329-36, April.
- Aggarwal, Raj & Mohanty, Sunil & Song, Frank, 1995. "Are Survey Forecasts of Macroeconomic Variables Rational?," The Journal of Business, University of Chicago Press, vol. 68(1), pages 99-119, January.
- Friedman, Benjamin M., 1980. "Survey evidence on the `rationality' of interest rate expectations," Journal of Monetary Economics, Elsevier, vol. 6(4), pages 453-465, October.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:36661. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Ekkehart Schlicht)
If references are entirely missing, you can add them using this form.