The Qualitative Expectations Hypothesis: Model Ambiguity, Consistent Representations of Market Forecasts, and Sentiment

Publikation: Working paper › Forskning

Standard

The Qualitative Expectations Hypothesis : Model Ambiguity, Consistent Representations of Market Forecasts, and Sentiment. / Frydman, Roman; Johansen, Søren; Rahbek, Anders; Tabor, Morten Nyboe.

2017.

Publikation: Working paper › Forskning

Harvard

Frydman, R, Johansen, S, Rahbek, A & Tabor, MN 2017 'The Qualitative Expectations Hypothesis: Model Ambiguity, Consistent Representations of Market Forecasts, and Sentiment'. <https://www.economics.ku.dk/research/publications/wp/dp_2017/1710.pdf>

APA

Frydman, R., Johansen, S., Rahbek, A., & Tabor, M. N. (2017). The Qualitative Expectations Hypothesis: Model Ambiguity, Consistent Representations of Market Forecasts, and Sentiment. University of Copenhagen. Institute of Economics. Discussion Papers (Online) Nr. 17-10Institute for New Economic Thinking Working Paper Series Nr. 59 https://www.economics.ku.dk/research/publications/wp/dp_2017/1710.pdf

Vancouver

Frydman R, Johansen S, Rahbek A, Tabor MN. The Qualitative Expectations Hypothesis: Model Ambiguity, Consistent Representations of Market Forecasts, and Sentiment. 2017.

Author

Frydman, Roman ; Johansen, Søren ; Rahbek, Anders ; Tabor, Morten Nyboe. / The Qualitative Expectations Hypothesis : Model Ambiguity, Consistent Representations of Market Forecasts, and Sentiment. 2017. (University of Copenhagen. Institute of Economics. Discussion Papers (Online); Nr. 17-10). (Institute for New Economic Thinking Working Paper Series; Nr. 59).

Bibtex

@techreport{a88116aba1404f10ae2d8c8db8ba964c,
title = "The Qualitative Expectations Hypothesis: Model Ambiguity, Consistent Representations of Market Forecasts, and Sentiment",
abstract = "We introduce the Qualitative Expectations Hypothesis (QEH) as a new approachto modeling macroeconomic and financial outcomes. Building on John Muth's seminal insight underpinning the Rational Expectations Hypothesis (REH), QEH represents the market's forecasts to be consistent with the predictions of an economist{\'i}s model. However, by assuming that outcomes lie within stochastic intervals, QEH, unlike REH, recognizes the ambiguity faced by an economist and market participants alike. Moreover, QEH leaves the model open to ambiguity by not specifying a mechanism determining specific values that outcomes take within these intervals. In order to examine a QEH model's empirical relevance, we formulate and estimate its statistical analog based on simulated data. We show that the proposed statistical model adequately represents an illustrative sample from the QEH model. We also illustrate how estimates of the statistical model's parameters can be used to assess the QEH model's qualitative implications.",
keywords = "Faculty of Social Sciences, Asset-Price Movements, Model Ambiguity, Models with Time-Varying Parameters, REH, Behavioral Finance, GAS Models, rational expectations",
author = "Roman Frydman and S{\o}ren Johansen and Anders Rahbek and Tabor, {Morten Nyboe}",
year = "2017",
language = "English",
series = "University of Copenhagen. Institute of Economics. Discussion Papers (Online)",
number = "17-10",
type = "WorkingPaper",

}

RIS

TY - UNPB

T1 - The Qualitative Expectations Hypothesis

T2 - Model Ambiguity, Consistent Representations of Market Forecasts, and Sentiment

AU - Frydman, Roman

AU - Johansen, Søren

AU - Rahbek, Anders

AU - Tabor, Morten Nyboe

PY - 2017

Y1 - 2017

N2 - We introduce the Qualitative Expectations Hypothesis (QEH) as a new approachto modeling macroeconomic and financial outcomes. Building on John Muth's seminal insight underpinning the Rational Expectations Hypothesis (REH), QEH represents the market's forecasts to be consistent with the predictions of an economistís model. However, by assuming that outcomes lie within stochastic intervals, QEH, unlike REH, recognizes the ambiguity faced by an economist and market participants alike. Moreover, QEH leaves the model open to ambiguity by not specifying a mechanism determining specific values that outcomes take within these intervals. In order to examine a QEH model's empirical relevance, we formulate and estimate its statistical analog based on simulated data. We show that the proposed statistical model adequately represents an illustrative sample from the QEH model. We also illustrate how estimates of the statistical model's parameters can be used to assess the QEH model's qualitative implications.

AB - We introduce the Qualitative Expectations Hypothesis (QEH) as a new approachto modeling macroeconomic and financial outcomes. Building on John Muth's seminal insight underpinning the Rational Expectations Hypothesis (REH), QEH represents the market's forecasts to be consistent with the predictions of an economistís model. However, by assuming that outcomes lie within stochastic intervals, QEH, unlike REH, recognizes the ambiguity faced by an economist and market participants alike. Moreover, QEH leaves the model open to ambiguity by not specifying a mechanism determining specific values that outcomes take within these intervals. In order to examine a QEH model's empirical relevance, we formulate and estimate its statistical analog based on simulated data. We show that the proposed statistical model adequately represents an illustrative sample from the QEH model. We also illustrate how estimates of the statistical model's parameters can be used to assess the QEH model's qualitative implications.

KW - Faculty of Social Sciences

KW - Asset-Price Movements

KW - Model Ambiguity

KW - Models with Time-Varying Parameters

KW - REH

KW - Behavioral Finance

KW - GAS Models

KW - rational expectations

M3 - Working paper

T3 - University of Copenhagen. Institute of Economics. Discussion Papers (Online)

BT - The Qualitative Expectations Hypothesis

ER -

ID: 182324679