On the power of direct tests for rational expectations against the alternative of constant gain learning

Victor Bystrov and Anna Staszewska-Bystrova

Bank i Kredyt, 2010, vol. 41, issue 6, 71-84

Abstract: In this paper we study the power of direct tests for rational expectations against the constant gain learning alternative. The investigation is by means of a Monte Carlo study. The tests considered use quantitative expectations data and qualitative survey data that has been quantified. The main finding is that the power of tests for rational expectations against constant gain learning may be very small, making it impossible to distinguish the hypotheses.

Keywords: adaptive learning; tests for rational expectations; quantification methods; constant gain least squares (search for similar items in EconPapers)
JEL-codes: C12 D83 D84 (search for similar items in EconPapers)
Date: 2010
Note: Support from the EU Commission through MRTN-CT-2006-034270 COMISEF is gratefully acknowledged. The authors would like to thank two anonymous referees for comments and suggestions which helped to improve this paper.
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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpbik:v:41:y:2010:i:6:p:71-84

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