How do US and Japanese investors process information, and how do they form their expectations of the future? Evidence from quantitative survey based data

Patricia Fraser ()
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Patricia Fraser: Accountancy and Finance, University of Aberdeen Business School, Edward Wright Building

Journal of Asset Management, 2004, vol. 5, issue 2, No 2, 77-90

Abstract: Abstract Contemporaneous survey data on the expectations of US and Japanese investors on the DJIA and the Nikkei are used to compute direct tests of investor rationality and efficiency and to provide evidence on the type of mechanism which best characterises expectation evolution. Over the period 1989–99, investors appear as biased and inefficient processors of information with the nature of the bias related to the index and its underlying fundamentals rather than the investor base. Investor expectations appear to be formed adaptively as a time-varying, weighted function of past forecast errors.

Keywords: investor expectations; survey data; rationality; efficiency; multi-equation; time-varying estimation (search for similar items in EconPapers)
Date: 2004
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DOI: 10.1057/palgrave.jam.2240130

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