Survey Expectations

78 Pages Posted: 7 Sep 2005

See all articles by M. Hashem Pesaran

M. Hashem Pesaran

University of Southern California - Department of Economics

Martin R. Weale

National Institute of Economic and Social Research (NIESR)

Date Written: November 2005

Abstract

This paper focusses on survey expectations and discusses their uses for testing and modeling of expectations. Alternative models of expectations formation are reviewed and the importance of allowing for heterogeneity of expectations is emphasized. A weak form of the rational expectations hypothesis which focusses on average expectations rather than individual expectations is advanced. Other models of expectations formation, such as the adaptive expectations hypothesis, are briefly discussed. Testable implications of rational and extrapolative models of expectations are reviewed and the importance of the loss function for the interpretation of the test results is discussed. The paper then provides an account of the various surveys of expectations, reviews alternative methods of quantifying the qualitative surveys, and discusses the use of aggregate and individual survey responses in the analysis of expectations and for forecasting.

Keywords: Models of Expectations Formation, Survey Data, Heterogeneity, Tests of Rational Expectations

JEL Classification: C40, C50, C53, C80

Suggested Citation

Pesaran, M. Hashem and Weale, Martin R., Survey Expectations (November 2005). IEPR Working Paper No. 05.30, CESifo Working Paper Series No. 1599, Available at SSRN: https://ssrn.com/abstract=796187

M. Hashem Pesaran (Contact Author)

University of Southern California - Department of Economics ( email )

3620 South Vermont Ave. Kaprielian (KAP) Hall 300
Los Angeles, CA 90089
United States

Martin R. Weale

National Institute of Economic and Social Research (NIESR) ( email )

2 Dean Trench Street
Smith Square
London SW1P 3HE
United Kingdom

HOME PAGE: http://www.niesr.ac.uk/

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