Sunday, November 10, 2013

Angry Bear » Rational Vs Adaptive Exectations

Angry Bear » Rational Vs Adaptive Exectations: "I note that the assumption of naive expectations leads to the belief that there will be irrational speculative bubbles in which agents assume some asset price will increase because it has in the past. This is one of they key features of the data. It is possible to reconcile this witih the rational expectations assumption, because anything at all can be reconciled with the assumption (note I never assert that the rational expectations hypothesis is false since we all agree that there is no falsifiable rational expectations hypothesis)."

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