113分析金融市场与金融机构_第六章.pptxVIP

Part II Principles of Financial MarketsChapter SixTHE THEORY OF EFFICIENT CAPITAL MARKETSChapter OutlineTheory of Rational ExpectationsEfficient Markets TheoryTheory of Rational ExpectationsExample:Suppose that when Joe travels when it is not rush hour, it takes average of 30 minutes for his trip to work. Sometimes it takes him 35 minutes, other times 25 minutes, but the a href=江西最好的癫痫病医院/aa href=江西最好的癫痫病医院/aaverage not-rush-hour driving time is 30 minutes. If ,however Joe leaves for wok during the rush hour ,it takes him ,on average, an additional 10minutes to wok. Given that his expectation are rational, what should Joe expect his driving time to be?Theory of Rational ExpectationsRational expectation (RE) = expectation that is optimal forecast (best prediction of future) using all available information: i.e., RE ?Xe = XofRational expectation, although optimal prediction, may not be accurate2 reasons expectation may not be rational 1. Not best prediction2. Not use available informationTheory of Rational ExpectationsRational expectations makes sense because is costly not to have optimal forecastImplications:1. Change in way variable moves, way expectations formed changes2. Forecast errors on average = 0 and are not predictableEfficient Market Hypothesis: Rational Expectations Applied to Financial MarketsExpectations in the financial markets are equal to optimal forecasts using all available informationEfficient Markets Hypothesisa href=江西最好的癫痫病医院/aa href=江西最好的癫痫病医院/aWhen financial markets are in equilibrium, prices of financial instruments reflect all readily available informationEfficient Markets TheoryEfficient Markets TheoryRational Expectations implies: Pet+1 = Poft+1 ? RETe = RETof (1)Market equilibrium RETe = RET* (2)Put (1) and (2) together: Efficient Markets Theory RETof = RET* Efficient Markets TheoryCurrent prices in a financial market will be set so that the optimal forecast of a security’s return using all available information equals the security’