Expectations formation and risk in three financial markets: surveying what the surveys say

MacDonald, R. (2000) Expectations formation and risk in three financial markets: surveying what the surveys say. Journal of Economic Surveys, 14(1), pp. 69-100. (doi: 10.1111/1467-6419.00105)

Abstract

This paper attempts to provide a logical overview of the literature which exploits survey data to examine issues of expectations formation and risk aversion in financial markets. Our survey suggests that: short term expectations are excessively volatile and exhibit bandwagon effects, while longer term expectations appear to be regressive and therefore stabilising; in bond and foreign exchange markets the standard result of forward rate biasedness is due in part to time-varying premia; recent research using disaggregate foreign exchange survey data demonstrates the importance of heterogeneous expectations.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: MacDonald, Professor Ronald
• Authors: MacDonald, R.
• College/School: College of Social Sciences > Adam Smith Business School > Economics
• Journal Name: Journal of Economic Surveys
• Publisher: Wiley-Blackwell Publishing Ltd.
• ISSN: 0950-0804
• ISSN (Online): 1467-6419