The rationality and reliability of expectations reported by British households: micro evidence from the British household panel survey

James Mitchell () and Martin R. Weale

No 2007,19, Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank, Research Centre

Abstract: This paper assesses the accuracy of individuals’ expectations of their financial circumstances, as reported in the British Household Panel Survey, as predictors of outcomes and identifies what factors influence their reliability. As the data are qualitative bivariate ordered probit models, appropriately identified, are estimated to draw out the differential effect of information on expectations and realisations. Rationality is then tested and we seek to explain deviations of realisations from expectations at a micro-economic level, possibly with reference to macroeconomic shocks. A bivariate regime-switching ordered probit model, distinguishing between states of rationality and irrationality, is then estimated to identify whether individual characteristics affect the probability of an individual using some alternative model to rationality to form their expectations.

Keywords: household behaviour; expectation formation (search for similar items in EconPapers)
JEL-codes: D19 D84 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-eec
Date: Written 2007
View list of references View citations in EconPapers

Downloads: (external link)
http://opus.zbw-kiel.de/volltexte/2007/6140/pdf/200719dkp.pdf (application/pdf)

Related works:
Working Paper: The Rationality and Reliability of Expectations Reported by British Households: Micro Evidence from the British Household Panel Survey (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Access Statistics for this paper

More papers in Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank, Research Centre
Contact information at EDIRC.
Series data maintained by ZBW - German National Library for Economics ().