Nonlinear Expectations in Speculative Markets

Stefan Reitz, Jan Rülke and Georg Stadtmann

VfS Annual Conference 2012 (Goettingen): New Approaches and Challenges for the Labor Market of the 21st Century from Verein für Socialpolitik / German Economic Association

Abstract: Heterogenous agents models have proven to be capable of explaining price dynamics on speculative markets. In general, this is achieved by allowing time series properties to be state dependent. This paper investigates whether market participants' expectations already reflect these time varying nonlinearities. 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.

JEL-codes: C33 D84 Q47 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-ore
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Citations: View citations in EconPapers (14)

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