tag:blogger.com,1999:blog-4039434.post9148864433791701640..comments2024-02-26T06:46:53.171-05:00Comments on Rajiv Sethi: Belief HeterogeneityRajivhttp://www.blogger.com/profile/13667685126282705505noreply@blogger.comBlogger19125tag:blogger.com,1999:blog-4039434.post-49363760411010543262014-01-23T11:41:17.962-05:002014-01-23T11:41:17.962-05:00Yes, for some reason the link no longer leads to t...Yes, for some reason the link no longer leads to the conference page, and I can't find the program online anywhere. Sorry about that. Rajivhttps://www.blogger.com/profile/13667685126282705505noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-40826593956337890772014-01-07T04:51:30.238-05:002014-01-07T04:51:30.238-05:00I'm extremely late to this party, but would yo...I'm extremely late to this party, but would you happen to have the program for the conference you linked in the beginning?<br /><br />The link redirects to the department home page.Artturihttps://www.blogger.com/profile/16634517394273574966noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-67617235122876317482011-02-20T20:36:23.999-05:002011-02-20T20:36:23.999-05:00Thanks Bruce, the effort is considerable but mostl...Thanks Bruce, the effort is considerable but mostly worthwhile. To answer your question - not explicitly. But both types of analysis were on display at this particular conference.Rajivhttps://www.blogger.com/profile/13667685126282705505noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-32349016831232091462011-02-20T17:36:43.298-05:002011-02-20T17:36:43.298-05:00I enjoy your blog posts. You are a very careful t...I enjoy your blog posts. You are a very careful thinker, and I appreciate your effort.<br /><br />In a conference such as the one you reference, do authors and commenters distinguish theoretical efforts at a priori analysis from quasi-empirical efforts to model the functioning of actual and specific institutions?Bruce Wilderhttps://www.blogger.com/profile/09631065564839959376noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-69246948464061844552011-02-19T08:29:10.733-05:002011-02-19T08:29:10.733-05:00andrew's
comment
about
using " other ...andrew's<br /> comment <br />about <br />using " other peoples money" <br />ie introducing<br />agent principal incentive contradictions <br />brings on another set of dimensions entirely <br /><br />fraud swindle puffery you name<br />the marketing of "ability "<br />with its deceptions fads etc <br /><br />are markets self correcting along these dimensions <br />only if crashing into a wall is<br />labeled a braking system ??Owen Painehttps://www.blogger.com/profile/13675803406994867138noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-71171817711103296822011-02-19T08:21:33.666-05:002011-02-19T08:21:33.666-05:00obviously agents operate with different "mo...obviously agents operate with different "move - position" <br />choice systems <br />as well as data bases <br /><br />my intuition as one <br />" adds in " <br /> varieties of systems<br /> the market behaviour <br />"results"<br /> approach each other <br />and yet we have influenzas that shake the grip of these systems <br />and generate rational ..if collectively self defeating ..<br /> stampedes<br /><br />i share joe stigs paradigm preference for rational agents<br />but i don't think it "matters " in "simulating " collective behaviours of markets <br />that are constantly generating internal contradiction<br />ie endogenous shocks<br /><br />uncertainty in the end overwhelms rational <br /> "method " because inherent spontaneous chaotic variability triumphs ..until the market "blows up " or is harnessed <br />'Owen Painehttps://www.blogger.com/profile/13675803406994867138noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-30438801000994667132011-02-18T19:26:56.130-05:002011-02-18T19:26:56.130-05:00A very helpful explanation. Thank you.A very helpful explanation. Thank you.Andrew Oh-Willekehttps://www.blogger.com/profile/02537151821869153861noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-62329912692612541032011-02-18T16:50:28.955-05:002011-02-18T16:50:28.955-05:00Andrew, these are important and valid points. Rega...Andrew, these are important and valid points. Regarding the latter, this is the basis of the "limits to arbitrage" literature: investors may withdraw from loss making funds just when the expected returns are highest. And yes, investor psychology can help us understand why.<br /><br />But what I resist is to reach for behavioral explanations reflexively for every empirical puzzle. For example, both Laibson and LeBaron presented models to explain the same set of facts: short run momentum, mean-reversion, and volatility clustering. Laibson's model had homogeneous investors who make forecasts based on much shorter lags than those generating the data. Le Baron had a population of forecasting rules in competition with each other. <br /><br />Did the models yield different predictions? No, because they were designed to account for the same set of facts. So how do we evaluate them? On the basis of two criteria: robustness and explanatory power. <br /><br />As Marcus Brunnermeier pointed out (politely) in his comments on the Laibson paper, the data generating process itself was assumed to create momentum and mean reversion, which was then amplified by investor behavior. This assumes (to a degree) what one is trying to explain. In contrast, LeBaron made no such assumption about the data generating process so his model had greater explanatory power. <br /><br />Furthermore, the behavioral model was not robust: small changes in assumptions would result in entirely different predictions. Allow investors using longer lag lengths to enter the market and they will take over, altering the model's predictions in the process. Again, Le Baron's model was more robust along this dimension: it was not obvious, at least to me, how a new forecasting rule omitted from his model would have done better than the incumbent rules.Rajivhttps://www.blogger.com/profile/13667685126282705505noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-60810793665139988912011-02-18T14:43:37.435-05:002011-02-18T14:43:37.435-05:00Are there generic predictions that are associated ...Are there generic predictions that are associated with particularly classes of models? If so, how do the differ?<br /><br />For example, what are Mr. LeBaron's models revealing that behavioral models do not?<br /><br />I also wonder if behaviorial economics doesn't have a supply side impact, even if traders themselves are aware of exploitable cognitive failures to act rationally, since most trading takes place with other people's money. Continued survival in the financial markets has as much to do with an ability to convince wealthy individuals to use them in making investments as it does with actual return maximizing prowess. A trader with a better strategy for securing high returns might have a harder time raising capital than a trader with a strategy that makes sense to investors despite its limitations.Andrew Oh-Willekehttps://www.blogger.com/profile/02537151821869153861noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-53402361546188736032011-02-18T12:17:47.034-05:002011-02-18T12:17:47.034-05:00Archisman, I think that the stability of rational ...Archisman, I think that the stability of rational expectations equilibrium paths under the dynamics of disequilibrium adjustment is an enormously important and under-explored research area in economics. I've discussed this issue in previous posts, for instance <a href="http://rajivsethi.blogspot.com/2009/11/on-rational-expectations-and.html" rel="nofollow">here</a>.Rajivhttps://www.blogger.com/profile/13667685126282705505noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-47339623192085918592011-02-18T09:18:10.165-05:002011-02-18T09:18:10.165-05:00Thanks for the post. For an engineer, this was inf...Thanks for the post. For an engineer, this was informative. For example, I had not really seen a mathmatical definition of the rational expectations hypothesis anywhere, the reference to the Muth paper certainly helps.<br /><br />Do you know if there is any work on stability of the rational expectations equilibrium? I guess this is an econophysics-y question, but I guess I am interested in modeling assumptions where small deviations/shocks from the rational expectations distributions are corrected. Perhaps the question does not make sense. Also do people look at higher moments other than expectations?<br /><br />I see you address some of the convergence question above, but does skewness/kurtosis play a part?archismanhttps://www.blogger.com/profile/14112202456234393180noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-90757216742414818702011-02-14T20:51:18.821-05:002011-02-14T20:51:18.821-05:00If you post it, we will come. It is appreciated.If you post it, we will come. It is appreciated.nogrehttps://www.blogger.com/profile/05290690073819948310noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-49055991793529873052011-02-13T15:30:45.815-05:002011-02-13T15:30:45.815-05:00Tim, I don't think the conference was recorded...Tim, I don't think the conference was recorded but here's a quick overview of the panel discussion. <br /><br />Guesnerie and Farmer both argued that rational expectations need not be abandoned wholesale, that there are some applications for which it is a reasonable and useful modeling hypothesis. Farmer went further, arguing that the focus should be on instability rather than any particular methodology, and that one could build models of instability and crisis with or without RE. Frydman thought that all the models presented at the conference suffered from the same flaws at RE and referred to his own recent work in order to make this point - I have not read this work and will therefore withhold comment. Marcet's comments I have summarized above - he thinks that we have gone well beyond the early learning literature (which was largely about convergence to RE) and are now building models of expectation dynamics to address positive questions. <br /><br />Paine, complexity does not have to mean quiescence, quite right and well put. <br /><br />Matt, I looked at your comments on Mark's page but haven't yet been able to grasp your argument...Rajivhttps://www.blogger.com/profile/13667685126282705505noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-85105878107926870182011-02-13T14:20:16.356-05:002011-02-13T14:20:16.356-05:00i guess i'm to in love with late godwin for my...i guess i'm to in love with late godwin for my own goodwin<br /><br /><br />complexity of causation as a claim doesn't have to mean<br />hayekian quiessence macro policy wise <br />we can see the record certain macro policy works about as expected lots of times<br />...at least from a clearly defined class point of view <br />what more do you need<br /><br />the plague of idle-ness is past <br />the patients are back on their feetOwen Painehttps://www.blogger.com/profile/13675803406994867138noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-78524600151303386492011-02-13T14:15:31.081-05:002011-02-13T14:15:31.081-05:00excellent quickie
the rationality of crowds ... ...excellent quickie<br /><br />the rationality of crowds ... mean<br /> <br />is that about the assumption ????<br /><br />it really is a pure sim if you assume a mechanical reality to the economy <br />ie a model-able system <br />no matter how dynamical and fragile <br /><br />i know saying a system is historical lacks sharp contours as a notion<br />but it seems harmless as an assumption<br /><br />if we can interact with a system in in performance improving ways<br />we can build a clinical science no ??? <br /><br />example<br />macro effective demand <br />management :<br /><br />enhancing "remedies"<br />like larger fiscal deficits<br />for a high unemployment<br />seemingly sluggish state <br />of a market based<br />for profit corporate dominated credit driven economy <br /><br />why require more till we reach some impasse<br />where this remedy is no longer effective<br /><br />okay if we push to long and to hard<br />with the deficit measures<br />vide the notorious 70's <br />we need to improve our handling of side effects like <br />wage push inflation <br /><br />i stray <br /><br />but to this purpose<br />maybe we don't need any more then a successful crtique of rat ex models<br />perhaps we are not required to build a better mouse trap<br />if we can use doc keynes patent elixir to "cure " the illOwen Painehttps://www.blogger.com/profile/13675803406994867138noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-47196206704096393412011-02-13T13:10:43.456-05:002011-02-13T13:10:43.456-05:00Any chance of a podcast of the discussion with Far...Any chance of a podcast of the discussion with Farmer et al.?Unknownhttps://www.blogger.com/profile/09689706300927026980noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-7889510238752908892011-02-13T08:25:52.277-05:002011-02-13T08:25:52.277-05:00Nick, thanks... that comment made me smile. I'...Nick, thanks... that comment made me smile. I'd gladly trade quantity for quality as far as traffic is concerned. I have a couple of dozen half-written posts lying around, just need to find the time and motivation to wrap them up and publish. My goal is a steady state of about one a week.Rajivhttps://www.blogger.com/profile/13667685126282705505noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-81503288861130166422011-02-13T06:19:12.062-05:002011-02-13T06:19:12.062-05:00Yep. We're still here. We read as regularly as...Yep. We're still here. We read as regularly as you post ;-). Keep on keeping us informed.Nick Rowehttps://www.blogger.com/profile/04982579343160429422noreply@blogger.comtag:blogger.com,1999:blog-4039434.post-6495456147457701262011-02-13T03:31:57.307-05:002011-02-13T03:31:57.307-05:00I like the comment section on Thoma's page, bu...I like the comment section on Thoma's page, but I am reading the LeBaron paper, it is great and as I read it I convert to my channel model (in my head), but it is hard to comment on this simple window. So I move to Thoma's site.Matt Younghttps://www.blogger.com/profile/08404998406161097199noreply@blogger.com