Full rationality implies that all agents are rational and the Rational Expectations Hypothesis (REH) thus fits nicely within a representative agent framework.
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The design of the experiment allows testing of whether prices adhere to Rational Expectations levels, and whether there is over- or under-reaction to new ...
Rational expectations is a building block for the “random walk” or “efficient markets” theory of securities prices, the theory of the dynamics of ...
Expectations are formed on the basis of past experiences only, typically as some kind of weighted average of past observations. EXAMPLE: To form a forecast for ...
It is these models for which economists often invoke the heroic assumption of convergence to rational expectations equilibrium where agents' beliefs and ...
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By studying two well known hypotheses in economics, this paper illustrates how emergent properties can be shown in an agent-based artificial stock market. The ...
In the remainder of this book, we consider the ways in which the RE hypothesis has been tested empirically. We begin in this chapter with.
Standard asset pricing models based on rational expectations and homogeneity have problems explaining the complex and volatile nature of financial markets.
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Jul 7, 2021 · In this review we discuss advances in the agent-based modeling of economic and social systems. We show the state of the art of the heuristic design of agents.
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Agent-based models build on these extensions of the basic asset pricing model by considering both rational learning and irrational expectations in a richer ...