Stochastic Expectations: Good Mathematics, Bad Economics
4 Pages Posted: 12 Jul 2015
Date Written: July 9, 2015
Abstract
An example is used to show that efficient market expectations are not the same as expectations in a stochastic process. An implication is that efficient market expectations need not have stochastic properties like orthogonality and variance bounds. Failure to recognize this fact has led to bad economic analysis.
Keywords: stochastic, efficient market, expectations, orthogonal, variance bounds
JEL Classification: G12, G13, G14
Suggested Citation: Suggested Citation
James, Robert G., Stochastic Expectations: Good Mathematics, Bad Economics (July 9, 2015). Available at SSRN: https://ssrn.com/abstract=2628943 or http://dx.doi.org/10.2139/ssrn.2628943
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