On the power of direct tests for rational expectations against the alternative of constant gain learning

In this paper we study the power of direct tests for rational expectations against the constant gain learning alternative. The investigation is by means of a Monte Carlo study. The tests considered use quantitative expectations data and qualitative survey data that has been quantified. The main finding is that the power of tests for rational expectations against constant gain learning may be very small, making it impossible to distinguish the hypotheses.

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Year of publication:	2010
Authors:	Bystrov, Victor ; Staszewska-Bystrova, Anna
Published in:	Bank i Kredyt. - Narodowy Bank Polski. - Vol. 41.2010, 6, p. 71-84
Publisher:	Narodowy Bank Polski
Subject:	adaptive learning \| tests for rational expectations \| quantification methods \| constant gain least squares

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Extent:	application/pdf
Type of publication:	Article
Language:	English
Notes:	Support from the EU Commission through MRTN-CT-2006-034270 COMISEF is gratefully acknowledged. The authors would like to thank two anonymous referees for comments and suggestions which helped to improve this paper.
Classification:	D84 - Expectations; Speculations ; D83 - Search, Learning, Information and Knowledge ; C12 - Hypothesis Testing
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008784499