Smooth Diagnostic Expectations

Material type: 文書・図像類

Author: Bianchi, Francescoほか

Publisher: The Institute of Social and Economic Research, Osaka University

Publication date: 2024-07

Material Format: Paper

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Note (General)：: We show that in the formalization of representativeness (Kahneman and Tversky (1972)) developed by Gennaioli and Shleifer (2010), overreaction and con...

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Paper

Material Type: 文書・図像類
Title: Smooth Diagnostic Expectations
Author/Editor: Bianchi, Francesco
Ilut, Cosmin
Saijo, Hikaru
Author Heading: Bianchi, Francesco
Ilut, Cosmin
Saijo, Hikaru
Publication, Distribution, etc.: The Institute of Social and Economic Research, Osaka University
Publication Date: 2024-07
Publication Date (W3CDTF): 2024-07
Periodical title: Institute of Social and Economic Research Discussion Papers
No. or year of volume/issue: 1249
Volume: 1249
Pages: 1-55
ISSN (Periodical Title): PISSN : 0473453X
EISSN : 24350982
Text Language Code: eng
Subject Heading: Diagnostic expectations
uncertainty
learning
overreaction
overconfidence
Target Audience: 一般
Note (General): We show that in the formalization of representativeness (Kahneman and Tversky (1972)) developed by Gennaioli and Shleifer (2010), overreaction and confidence are affected by uncertainty, as a news effect interacts with an uncertainty effect. In the time series domain, this interaction emerges in a smooth version of Diagnostic Expectations (DE). Under smooth diagnosticity, agents overreact to new information. Since new information typically changes not just the conditional mean, but also the conditional uncertainty, changes in uncertainty surrounding current and past beliefs affect the severity of the DE distortion and confidence. Smooth DE implies a joint and parsimonious micro-foundation for key properties of survey data: (1) overreaction of conditional mean to news, (2) stronger overreaction for weaker signals and longer forecast horizons, and (3) overconfidence in subjective uncertainty. An analytical RBC model featuring Smooth DE accounts for overreaction and overconfidence in surveys, as well as three salient properties of the business cycle: (1) asymmetry, (2) countercyclical micro volatility, and (3) countercyclical macro volatility.
References (URI): URI
https://www.iser.osaka-u.ac.jp/library/dp/2024/DP1249.pdf
Data Provider (Database): 国立情報学研究所 : 学術機関リポジトリデータベース（IRDB）（機関リポジトリ）
https://irdb.nii.ac.jp
Original Data Provider (Database): 大阪大学 : 大阪大学学術情報庫　桜華