Rational or irrational expectations? Evidence from China's stock market
Purpose – The paper aims to test the rational-expectations hypothesis using data from the Chinese stock market. Design/methodology/approach – The rational-expectations hypothesis plays a critical role in economic and financial studies. However, it is unclear whether this hypothesis is consistent with real-world decision making since existing empirical results are mixed. This paper tests the hypothesis directly using survey data from China's stock market by developing a technique to analyze discrete or limited independent-variable models. Findings – The paper shows that in China's stock market survey forecasts are overly optimistic, especially with positive information, and can be improved slightly using past information. Originality/value – The paper develops a technique to analyze the discrete or limited independent-variable model. Testing with Chinese stock market data provides some insights into the characteristics of emerging markets.
In order to set up a list of libraries that you have access to,
you must first login
or sign up.
Then set up a personal list of libraries from your profile page by
clicking on your user name at the top right of any screen.