Are Investment Expectations Rational, Adaptive or Regressive?

14 Pages Posted: 12 Jan 2011

Date Written: January 10, 2011

Abstract

A unique previously unavailable dataset is employed to study the nature of expectations formed by manufacturing plants as they plan their own capital expenditures. Both conventional rational expectations and adaptive expectations hypotheses are found to be inconsistent with the data, which instead favor a regressive expectations formation process. These results, obtained using real-world data on plants, further develop the growing recent literature on survey expectations and the information about economic models that can be gleaned from them.

JEL Classification: E22, C23, C83

Suggested Citation

Dave, Chetan, Are Investment Expectations Rational, Adaptive or Regressive? (January 10, 2011). Economic Inquiry, Vol. 49, Issue 1, pp. 212-225, 2011. Available at SSRN: https://ssrn.com/abstract=1738128 or http://dx.doi.org/10.1111/j.1465-7295.2010.00305.x

Chetan Dave (Contact Author)

New York University ( email )

Department of Economics
19 W. 4th Street, 6FL
New York, NY 10012
United States

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