TY  - JOUR
AU  - Friedman,Benjamin M.
TI  - Survey Evidence on The Rationality of Interest Rate Expectations
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 261
PY  - 1980
Y2  - December 1980
UR  - http://www.nber.org/papers/w0261
L1  - http://www.nber.org/papers/w0261.pdf
N1  - Author contact info:
Benjamin M. Friedman
Department of Economics
Littauer Center 127
Harvard University
Cambridge, MA  02138
Tel: 617/495-4246
Fax: 617/495-7730
E-Mail: bfriedman@harvard.edu
AB  - An analysis of predictions of six interest rates over 3-months-ahead and 6-months-aheadhorizons, surveyed regularly over eight years, casts doubt on the hypothesis that market participants' expectations are 'rational' in Muth's sense. Tests show that the survey respondents did not make unbiased predictions, that (especially for the 6-months-ahead predictions) they did not efficiently exploit the information contained in past interest rate movements, that their respective 3-months-ahead and 6-months-ahead predictions failed to be consistent in the sense required for 'rationality', and that (for long-term but not short-term interest rates) their predictions failed to exploit efficiently the information contained in common macroeconomic and macro-policy variables other than the money stock.
ER  -