Browsing Evans, George W. by Author "Branch, William A."
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Branch, William A.; Evans, George W., 1949; Carlson, John; McGough, Bruce (University of Oregon, Dept of Economics, June 22, 2006)[more][less]Branch, William A. Evans, George W., 1949 Carlson, John McGough, Bruce 20061002T20:00:03Z 20061002T20:00:03Z 20060622 http://hdl.handle.net/1794/3423 11 p. This paper develops an adaptive learning formulation of an extension to the Ball, Mankiw and Reis (2005) sticky information model that incorporates endogenous inattention. We show that, following an exogenous increase in the policymaker’s preferences for price vs. output stability, the learning process can converge to a new equilibrium in which both output and price volatility are lower. 179460 bytes application/pdf en_US University of Oregon, Dept of Economics University of Oregon Economics Department Working Papers ; 20066 Optimal monetary policy Bounded rationality Economic stabilization Adaptive learning Adaptive Learning, Endogenous Inattention, and Changes in Monetary Policy Working Paper

Branch, William A.; Evans, George W., 1949 (University of Oregon, Dept of Economics, November 13, 2006)[more][less]Branch, William A. Evans, George W., 1949 20070116T17:29:00Z 20070116T17:29:00Z 20061113 http://hdl.handle.net/1794/3797 40 p. This paper advocates a theory of expectation formation that incorporates many of the central motivations of behavioral finance theory while retaining much of the discipline of the rational expectations approach. We provide a framework in which agents, in an asset pricing model, underparameterize their forecasting model in a spirit similar to Hong, Stein, and Yu (2005) and Barberis, Shleifer, and Vishny (1998), except that the parameters of the forecasting model, and the choice of predictor, are determined jointly in equilibrium. We show that multiple equilibria can exist even if agents choose only models that maximize (riskadjusted) expected profits. A realtime learning formulation yields endogenous switching between equilibria. We demonstrate that a realtime learning version of the model, calibrated to U.S. stock data, is capable of reproducing many of the salient empirical regularities in excess return dynamics such as under/overreaction, persistence, and volatility clustering. 364168 bytes application/pdf en_US University of Oregon, Dept of Economics University of Oregon Economics Department Working Papers ; 200614 Asset pricing Misspecification Behavioral finance Predictability Adaptive learning Asset Return Dynamics and Learning Working Paper

Branch, William A.; Evans, George W., 1949 (University of Oregon, Dept. of Economics, May 16, 2003)[more][less]Branch, William A. Evans, George W., 1949 20031211T19:46:23Z 20031211T19:46:23Z 20030516 http://hdl.handle.net/1794/126 We introduce the concept of a Misspecification Equilibrium to dynamic macroeconomics. Agents choose between a list of misspecified econometric models and base their selection on relative forecast performance. A Misspecification Equilibrium is an equilibrium stochastic process in which agents forecast optimally given their choices, with the forecasting model parameters and predictor proportions endogenously determined. For appropriate conditions on the exogenous driving process and the degree of feedback of expectations, the Misspecification Equilibrium will exhibit Intrinsic Heterogeneity. With Intrinsic Heterogeneity more than one misspecified model receives positive weight in the distribution of predictors across agents, even in the neoclassical limit in which only the most successful predictors are used. 502,648 bytes application/pdf en_US University of Oregon, Dept. of Economics University of Oregon Economics Department Working Papers;200332 Mathematical and quantitative methods Macroeconomics and monetary economics Expectations Prices, business fluctuations, and cycles Speculations Mathematical methods and programming Existence and stability conditions of equilibrium Intrinsic Heterogeneity in Expectation Formation Working Paper

Branch, William A.; Evans, George W., 1949 (University of Oregon, Dept of Economics, January 31, 2008)[more][less]Branch, William A. Evans, George W., 1949 20080320T16:40:42Z 20080320T16:40:42Z 20080131 http://hdl.handle.net/1794/5776 42 p. This paper demonstrates that an asset pricing model with leastsquares learning can lead to bubbles and crashes as endogenous responses to the fundamentals driving asset prices. When agents are riskaverse they generate forecasts of the conditional variance of a stock’s return. Recursive updating of the conditional variance and expected return implies two mechanisms through which learning impacts stock prices: occasional shocks may lead agents to lower their risk estimate and increase their expected return, thereby triggering a bubble; along a bubble path recursive estimates of risk will increase and crash the bubble. 3742112 bytes application/pdf en_US University of Oregon, Dept of Economics University of Oregon Economics Department Working Papers ; 20081 Risk Asset pricing Bubbles Adaptive learning Stocks  Prices Learning about Risk and Return: A Simple Model of Bubbles and Crashes Working Paper

Branch, William A.; Evans, George W., 1949 (University of Oregon, Dept of Economics, October 18, 2005)[more][less]Branch, William A. Evans, George W., 1949 20051215T20:01:06Z 20051215T20:01:06Z 20051018 http://hdl.handle.net/1794/1960 41 p. This paper identifies two channels through which the economy can generate endogenous inflation and output volatility, an empirical regularity, by introducing model uncertainty into a Lucastype monetary model. The equilibrium path of inflation depends on agents' expectations and a vector of exogenous random variables. Following Branch and Evans (2004) agents are assumed to underparameterize their forecasting models. A Misspecification Equilibrium arises when beliefs are optimal given the misspecification and predictor proportions based on relative forecast performance. We show that there may exist multiple Misspecification Equilibria, a subset of which are stable under least squares learning and dynamic predictor selection. The dual channels of least squares parameter updating and dynamic predictor selection combine to generate regime switching and endogenous volatility. 473672 bytes application/pdf en_US University of Oregon, Dept of Economics University of Oregon Economics Department Working Papers ; 200521 Lucas model Model uncertainty Adaptive learning Rational expectations (Economic theory) Volatility Model Uncertainty and Endogenous Volatility Working Paper

Branch, William A.; Evans, George W., 1949 (University of Oregon, Dept of Economics, April 30, 2010)[more][less]Branch, William A. Evans, George W., 1949 20110210T00:18:15Z 20110210T00:18:15Z 20100430 http://hdl.handle.net/1794/10965 25, 10 p. : ill. (some col.) This paper studies the implications for monetary policy of heterogeneous expectations in a New Keynesian model. The assumption of rational expec tations is replaced with parsimonious forecasting models where agents select between predictors that are underparameterized. In a Misspecification Equilibrium agents only select the bestperforming statistical models. We demonstrate that, even when monetary policy rules satisfy the Taylor principle by adjusting nominal interest rates more than one for one with inflation, there may exist equilibria with Intrinsic Heterogeneity. Under certain conditions, there may exist multiple misspecification equilibria. We show that these findings have important implications for business cycle dynamics and for the design of monetary policy. en_US University of Oregon, Dept of Economics University of Oregon Economics Department Working Papers;20104 Heterogeneous expectations Monetary policy Multiple equilibria Adaptive learning Monetary Policy and Heterogeneous Expectations Working Paper

Branch, William A.; Carlson, John; Evans, George W., 1949; McGough, Bruce (University of Oregon, Dept of Economics, December 7, 2004)[more][less]Branch, William A. Carlson, John Evans, George W., 1949 McGough, Bruce 20050322T23:14:05Z 20050322T23:14:05Z 20041207 http://hdl.handle.net/1794/662 52 p. This paper addresses the outputprice volatility puzzle by studying the interaction of optimal monetary policy and agents' beliefs. We assume that agents choose their information acquisition rate by minimizing a loss function that depends on expected forecast errors and information costs. Endogenous inattention is a Nash equilibrium in the information processing rate. Although a decline of policy activism directly increases output volatility, it indirectly anchors expectations, which decreases output volatility. If the indirect effect dominates then the usual tradeoff between output and price volatility breaks down. This provides a potential explanation for the "Great Moderation" that began in the 1980's. 531074 bytes application/pdf en_US University of Oregon, Dept of Economics University of Oregon Economics Department Working Papers ; 200419 Expectations Optimal monetary policy Bounded rationality Economic stabilization Adaptive learning Monetary Policy, Endogenous Inattention, and the Volatility Tradeoff Working Paper

Branch, William A.; Evans, George W., 1949 (University of Oregon, Dept of Economics, February 1, 2005)[more][less]Branch, William A. Evans, George W., 1949 20050322T22:26:23Z 20050322T22:26:23Z 20050201 http://hdl.handle.net/1794/654 10 p. We compare the performance of alternative recursive forecasting models. A simple constant gain algorithm, used widely in the learning literature, both forecasts well out of sample and also provides the best fit to the Survey of Professional Forecasters. 252245 bytes application/pdf en_US University of Oregon, Dept of Economics University of Oregon Economics Department Working Papers ; 20053 Constant gain Recursive learning Expectations A Simple Recursive Forecasting Model Working Paper
Now showing items 18 of 8