Nonlinear expectations in speculative markets - Evidence from the ECB survey of professional forecasters

Stefan Reitz, Jan-Christoph Rülke and Georg Stadtmann ()
Additional contact information
Jan-Christoph Rülke: Department of Economics, Postal: WHU - Otto Beisheim School of Management
Georg Stadtmann: Department of Business and Economics, Postal: University of Southern Denmark, Campusvej 55, DK-5230 Odense M, Denmark

No 1/2012, Discussion Papers on Economics from University of Southern Denmark, Department of Economics

Abstract: Chartist and fundamentalist models have proven to be capable of replicating stylized facts on speculative markets. In general, this is achieved by specifying nonlinear interactions of otherwise linear asset price expectations of the respective trader groups. This paper investigates whether or not regressive and extrapolative expectations themselves exhibit significant nonlinear dynamics. The empirical results are based on a new data set from the European Central Bank Survey of Professional Forecasters on oil price expectations. In particular, we find that forecasters form destabilizing expectations in the neighborhood of the fundamental value, whereas expectations tend to be stabilizing in the presence of substantial oil price misalignment.

Keywords: Agent based models; nonlinear expectations; survey data (search for similar items in EconPapers)
JEL-codes: C33 D84 F31 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2012-01-03
New Economics Papers: this item is included in nep-cba, nep-for and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Related works:
Journal Article: Nonlinear expectations in speculative markets – Evidence from the ECB survey of professional forecasters (2012)
Working Paper: Nonlinear expectations in speculative markets: Evidence from the ECB survey of professional forecasters (2012)
Working Paper: Nonlinear expectations in speculative markets: Evidence from the ECB survey of professional forecasters (2011)
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