Xavier D'Haultfoeuille, Christophe Gaillac, Arnaud Maurel
arXiv 25 Mar 2020 · Econometrics · publishedQuantitative Economics (2021) · 28 citations (OpenAlex)
arXiv:2003.11537 · PDF · DOI · OpenAlex · Extracted main text
In this paper, we build a new test of rational expectations based on the marginal distributions of realizations and subjective beliefs. This test is widely applicable, including in the common situation where realizations and beliefs are observed in two different datasets that cannot be matched. We show that whether one can rationalize rational expectations is equivalent to the distribution of realizations being a mean-preserving spread of the distribution of beliefs. The null hypothesis can then be rewritten as a system of many moment inequality and equality constraints, for which tests have been recently developed in the literature. The test is robust to measurement errors under some restrictions and can be extended to account for aggregate shocks. Finally, we apply our methodology to test for rational expectations about future earnings. While individuals tend to be right on average about their future earnings, our test strongly rejects rational expectations.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Andrews \ Shi (2017) `Inference based on many conditional moment inequalities', Journal of Econometrics 196(2), 275–287 | 1.000 | 5 | 4 | 100% |
| 2 | D'Haultfuille, Gaillac \ Maurel (2018) Rationalizing rational expectations? Tests and deviations | 0.843 | 3 | 3 | 100% |
| 3 | Strassen (1965) `The existence of probability measures with given marginals', The Annals of Mathematical Statistics 36(2), 423–439 | 0.737 | 3 | 3 | 67% |
| 4 | Arcidiacono, Hotz, Maurel \ Romano (2014) Recovering ex ante returns and preferences for occupations using subjective expectations data | 0.737 | 3 | 2 | 100% |
| 5 | Delavande (2008) `Pill, patch, or shot? subjective expectations and birth control choice', International Economic Review 49(3), 999–1042 | 0.737 | 3 | 2 | 100% |
| 6 | Kuchler \ Zafar (2019) `Personal experiences and expectations about aggregate outcomes', Journal of Finance 74, 2491–2542 | 0.737 | 3 | 2 | 100% |
| 7 | Armantier, Topa, Van der Klaauw \ Zafar (2017) `An overview of the survey of consumer expectations', Economic Policy Review 23(2), 51–72 | 0.693 | 5 | 1 | 100% |
| 8 | Manski (2004) `Measuring expectations', Econometrica 72(5), 1329–1376 | 0.644 | 3 | 2 | 67% |
| 9 | Arcidiacono, Hotz \ Kang (2012) `Modeling college major choices using elicited measures of expectations and counterfactuals', Journal of Econometrics 166(1), 3–16 | 0.644 | 2 | 2 | 100% |
| 10 | D'Haultfuille, Gaillac \ Maurel (2018) Rationalexp: Tests of and deviations from rational expectations | 0.644 | 2 | 2 | 100% |
Showing the top 10 of 57 scored citations.
arXiv econ.EM papers that cite this one, ranked by how heavily they lean on it.
| Citing paper | Intensity | Mentions | Sections | |
|---|---|---|---|---|
| 1 | Partially Linear Models under Data Combination | 0.737 | 4 | 4 |
| 2 | Heterogeneity, Uncertainty and Learning: Semiparametric Identification and Estimation | 0.405 | 1 | 1 |
| 3 | An econometrician's guide to optimal transport | 0.405 | 1 | 1 |