EconPapers    
Economics at your fingertips  
 

The Effect of Disaggregate Information on the Expectation Formation of Firms

Lukas Buchheim and Sebastian Link

No 6768, CESifo Working Paper Series from CESifo Group Munich

Abstract: This paper studies a new aspect of firms’ expectation formation by asking whether expectations primarily reflect aggregate, industry-wide information (e.g., industry trends) or disaggregate information (e.g., firm-specific information). First, we show that disaggregate information is strongly associated with expectations even when controlling for aggregate information at high-dimensional industry levels. Moreover, aggregate and disaggregate information explain comparable shares of the variance in expectations. Second, we exploit a natural experiment to identify the causal effect of new information on expectations. The predictable demand effects for durable goods due to the German VAT increase of 2007 implied that, at the time, durable goods retailers had access to more reliable information about their future demand than non-durable goods retailers. Utilizing this observation in a difference-in-differences design, we find that “treated” firms were significantly more forward-looking ahead of the VAT-induced demand shifts. Overall, our results suggest that firms rationally incorporate disagreggate information into their expectations.

Keywords: expectation formation; firm behavior; survey data; natural experiments in macroeconomics; heterogeneity in expectations (search for similar items in EconPapers)
JEL-codes: D84 D22 E20 E32 E65 H32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
https://www.cesifo-group.de/DocDL/cesifo1_wp6768.pdf (application/pdf)

Related works:
Working Paper: The Effect of Disaggregate Information on the Expectation Formation of Firms (2017) Downloads
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:ces:ceswps:_6768

Access Statistics for this paper

More papers in CESifo Working Paper Series from CESifo Group Munich Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().

 
Page updated 2019-11-22
Handle: RePEc:ces:ceswps:_6768