infinite-horizon learning, and subjective expectations with Euler-equation learning. Under rational expectations, the model … necessitates of large, possibly unrealistically so, degrees of myopia. The same result persists under infinite-horizon learning …, given that agents are still remarkably farsighted. But, under Euler-equation learning, the model can fit the data with only …

The adaptive learning approach has been fruitfully employed to model the formation of aggregate expectations at the … macroeconomic level, as an alternative to rational expectations. This paper uses adaptive learning to understand, instead, the … sentiment, defined as the degrees of excess optimism and pessimism that cannot be justified by the near-rational learning model …