00000nam 2200000zi 4500 9.877352 CaOODSP 20221107164943 m go d f cr |n||||||||| 190801t20192019oncd |ob f000 0 eng d CaOODSP eng rda CaOODSP n-cn--- FB3-5/2019-27E-PDF Evans, George, author. Are long-horizon expectations (de-)stabilizing? : theory and experiments / by George Evans, Cars Hommes, Bruce McGough and Isabelle Salle. [Ottawa] : Bank of Canada = Banque du Canada, 2019. ©2019 1 online resource (ii, 61 pages) : figures. text txt rdacontent computer c rdamedia online resource cr rdacarrier Bank of Canada staff working paper, 1701-9397 ; 2019-27 "August 2019." Includes bibliographical references (pages 32-34) . "We consider boundedly rational agents who do not plan over the infinite future but make trading plans at a finite, arbitrary horizon. We investigate the role of that horizon in the price dynamics of an asset in a Lucas tree model. We then design a laboratory experiment to test our theoretical predictions against the behaviors of human subjects. Short-horizon markets are prone to substantial and prolonged deviations from rational expectations (RE). By contrast, markets populated by even a modest share of long-horizon forecasters exhibit convergence towards the fundamental price. Longer-horizon forecasts do display more heterogeneity and thus some departure from RE; however this same heterogeneity also prevents the coordination of subjects on wrong anchors—a pattern of behavior that leads to mispricing in short-horizon markets. Long-horizon forecasts are well-described by adaptive learning, which delivers convergence to RE equilibrium, while short-horizon forecasts exhibit destabilizing trend-chasing"--Abstract. gccst Markets Hommes, Carsien Harm, author. McGough, Bruce, author. Salle, Isabelle, author. Bank of Canada. Staff working paper (Bank of Canada) 1701-9397 ; 2019-27. (CaOODSP)9.806221 PDF 3.37 MB https://publications.gc.ca/collections/collection_2019/banque-bank-canada/FB3-5-2019-27-eng.pdf