Milani, Fabio - Department of Economics, University of California-Irvine - 2014
are assumed to be formed from a near-rational learning model. Agents are endowed with a perceived law of motion that … updating their beliefs through constant-gain learning. In each period, however, they may form expectations that fall above or … below those implied by the learning model. These deviations capture excesses of optimism and pessimism, which can be quite …
