Rational or irrational expectations? Evidence from China's stock market
Purpose – The paper aims to test the rational-expectations hypothesis using data from the Chinese stock market. Design/methodology/approach – The rational-expectations hypothesis plays a critical role in economic and financial studies. However, it is unclear whether this hypothesis is consistent with real-world decision making since existing empirical results are mixed. This paper tests the hypothesis directly using survey data from China's stock market by developing a technique to analyze discrete or limited independent-variable models. Findings – The paper shows that in China's stock market survey forecasts are overly optimistic, especially with positive information, and can be improved slightly using past information. Originality/value – The paper develops a technique to analyze the discrete or limited independent-variable model. Testing with Chinese stock market data provides some insights into the characteristics of emerging markets.
Year of publication: |
2008
|
---|---|
Authors: | Gao, Feng ; Song, Fengming ; Wang, Jun |
Published in: |
Journal of Risk Finance. - Emerald Group Publishing. - Vol. 9.2008, November, 5, p. 432-448
|
Publisher: |
Emerald Group Publishing |
Subject: | China | Expectation | Financial forecasting | Stock markets |
Saved in:
Online Resource
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