Kiel Working Papers, Kiel Institute for World Economics
No 1706:
Nonlinear Expectations in Speculative Markets - Evidence from the ECB Survey of Professional Forecasters
Stefan Reitz, Jan-Christoph Rülke and Georg Stadtmann
Abstract: Chartist and fundamentalist models have proven to be
capable of replicating stylized facts on speculative markets. In general,
this is achieved by specifying nonlinear interactions of otherwise linear
asset price expectations of the respective trader groups. This paper
investigates whether or not regressive and extrapolative expectations
themselves exhibit significant nonlinear dynamics. The empirical results
are based on a new data set from the European Central Bank Survey of
Professional Forecasters on oil price expectations. In particular, we find
that forecasters form destabilizing expectations in the neighborhood of the
fundamental value, whereas expectations tend to be stabilizing in the
presence of substantial oil price misalignment
Keywords: agent based models, nonlinear expectations, survey data; (follow links to similar papers)
JEL-Codes: F31,; D84,; C33; (follow links to similar papers)
39 pages, June 2011
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