Tests of the Rational Expectations Hypothesis

Michael Lovell

American Economic Review, 1986, vol. 76, issue 1, 110-24

Abstract: This paper reviews evidence on the structure of anticipation from a number of empirical studies. Jack Muth's "rational expectations hypothesis" is compared with a variety of alternative models, including Ferber's Law, the "implicit expectations" model of Edwin Mills, and Muth's new "errors in the variables" model. The cumulative evidence is of such strength as to compel the suspension of belief in the concept of rational expectations. This implies that it is a mistake to proceed under the maintained hypothesis that expectations are rational; instead, it is necessary to test the sensitivity of empirical and theoretical results to alternative assumptions about the structure by which anticipations are generated. Copyright 1986 by American Economic Association.

Date: 1986
References: Add references at CitEc
Citations: View citations in EconPapers (118)

Downloads: (external link)
http://links.jstor.org/sici?sici=0002-8282%2819860 ... O%3B2-7&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

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:aea:aecrev:v:76:y:1986:i:1:p:110-24

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().