Journal article
Diagnostic expectations and credit cycles
- Abstract:
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We present a model of credit cycles arising from diagnostic expectations – a belief formation mechanism based on Kahneman and Tversky’s (1972) representativeness heuristic. Diagnostic expectations overweight future outcomes that become more likely in light of incoming data. The expectations formation rule is forward looking and depends on the underlying stochastic process, thus being immune to the Lucas critique. Diagnostic expectations reconcile extrapolation and neglect of risk in a unified...
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- Publication status:
- Published
- Peer review status:
- Peer reviewed
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- Files:
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(Accepted manuscript, pdf, 1.1MB)
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- Publisher copy:
- 10.1111/jofi.12586
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Authors
Funding
+ Pershing Square Venture Fund for Research on the Foundations of Human Behavior
More from this funder
Funding agency for:
Shleifer, A
Bibliographic Details
- Publisher:
- Wiley Publisher's website
- Journal:
- Journal of Finance Journal website
- Volume:
- 73
- Issue:
- 1
- Pages:
- 199-227
- Publication date:
- 2018-01-26
- Acceptance date:
- 2017-02-22
- DOI:
- EISSN:
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1540-6261
- ISSN:
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0022-1082
- Source identifiers:
-
684117
Item Description
- Pubs id:
-
pubs:684117
- UUID:
-
uuid:a78deb53-6193-41e8-b5ff-50647f4e7263
- Local pid:
- pubs:684117
- Deposit date:
- 2017-03-07
Terms of use
- Copyright holder:
- American Finance Association
- Copyright date:
- 2018
- Rights statement:
- © 2017 the American Finance Association
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