Rational or irrational expectations? Evidence from China's stock market

Feng Gao, Fengming Song and Jun Wang

Journal of Risk Finance, 2008, vol. 9, issue 5, 432-448

Abstract: 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.

Keywords: China; Stock markets; Expectation; Financial forecasting (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:jrfpps:15265940810916102

DOI: 10.1108/15265940810916102

Access Statistics for this article

Journal of Risk Finance is currently edited by Nawazish Mirza

More articles in Journal of Risk Finance from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().