We study how subjects extrapolate simple patterns in financial time series in order to develop a descriptive model of actual agent behavior. The laboratory experiment for this analysis was conducted in Germany and Japan. Statistical analyses indicate considerable similarity in expectations formation across cultures and document that agents’ expectations are at variance with the notion of standa...

Donald Trump’s election was a significant surprise. The reaction of company stock prices to the election reflects shifts in investor expectations about economic growth, taxes, and trade policy. High-beta stocks outperformed, presumably due to strengthened growth expectations. Expectations of significant corporate tax cuts boosted high-tax firms, but hurt firms with significant net operating los...

Expectations clearly play a central role in modern macroeconomics. Households and …rms are assumed to be dynamic optimizers, making decisions about work, consumption, savings, production and investment, based in part on current economic conditions, but also to a great extent on the future state of the economy. Thus, in particular, household saving and portfolio decisions depend on expected futu...

Capitalism is an economic and social order oriented toward the future. In this paper, I describe the unfolding of the temporal order of capitalism and relate it to the restless dynamism of capitalism we have observed since the Industrial Revolution. Since the future is open, actors are confronted with the uncertainty of the outcomes of their decisions. What can expectations be under conditions ...

A different approach for extracting expectations concentrates merely on reading financial data – without the underpinning of a comprehensive economic model. Prices of financial instruments can reveal some expectations. And innovative products are widening the scope of this approach. Inflationlinked swaps, for example, allow the computation of an inflation curve similar to the yield curve, provi...

Recognizing that the economy is a complex system with boundedly rational interacting agents, the book presents a theory of behavioral rationality and heterogeneous expectations in complex economic systems and confronts the nonlinear dynamic models with empirical stylized facts and laboratory experiments. The complexity modeling paradigm has been strongly advocated since the late 1980s by some e...

Can ideology, as a widespread "expectation creator," impact economic decisions? In two studies we investigated the influence of the Benevolent Sexism (BS) ideology (which dictates that men should provide for passive and nurtured women) on women's economic decision-making. In Study 1, using a Dictator Game in which women decided how to share amounts of money with men, results of a Generalized Li...

The majority of economic decisions are forward looking and thus involve expectations of future outcomes. Understanding the expectations that individuals have is thus of crucial importance to designing and evaluating policies in health, education, finance, migration, social protection, and many other areas. However, the majority of developing country surveys are static in nature and many do not ...

This article discusses how the Extreme Makeover: HomeEditionUStelevision reality program, which focuses on rebuilding houses for those in need,sets unrealistic boundaries for the American Dream’s standard of living oflow-income homeowners in the United States. Passing through economic hardshipin the past several years, it is important to study how this program can meet thereal expectations of t...

We present new experimental evidence on heterogeneity in the formation of inflation expectations and relate the variation to economic literacy and demographics. The experimental design allows us to investigate two channels through which expectations-formation may vary across individuals: (1) the choice of information and (2) the use of given information. Subjects who are more economically liter...