Journal article
Perpetual learning and apparent long memory
- Abstract:
- This paper studies the low frequency dynamics in forward looking models where expectations are formed using perpetual learning such as constant gain least squares. We show that if the coefficient on expectations is sufficiently close to unity, perpetual learning induces strong persistence that is empirically indistinguishable from long memory. We apply this result to present value models of stock prices and exchange rates and find that perpetual learning can explain the long memory observed in the data.
- Publication status:
- Published
- Peer review status:
- Peer reviewed
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- Files:
-
-
(Preview, Accepted manuscript, pdf, 690.1KB, Terms of use)
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- Publisher copy:
- 10.1016/j.jedc.2018.03.012
Authors
- Publisher:
- Elsevier
- Journal:
- Journal of Economic Dynamics and Control More from this journal
- Volume:
- 90
- Pages:
- 343-365
- Publication date:
- 2018-03-31
- Acceptance date:
- 2018-03-23
- DOI:
- EISSN:
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1879-1743
- ISSN:
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0165-1889
- Language:
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English
- Keywords:
- Pubs id:
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pubs:835114
- UUID:
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uuid:89297f88-37da-459e-8f0e-b4302235fe7a
- Local pid:
-
pubs:835114
- Source identifiers:
-
835114
- Deposit date:
-
2018-04-11
Terms of use
- Copyright holder:
- Elsevier BV.
- Copyright date:
- 2018
- Rights statement:
- © 2018 Elsevier BV.
- Notes:
- This is the accepted manuscript version of the article. The final version is available online from Elsevier at https://doi.org/10.1016/j.jedc.2018.03.012
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