Center for Economic Research, Department of Economics, University of Minnesota
This paper is devoted to the question of whether traders can learn rational
expectations from repeated observations of market data in a stationary environment
with finitely many exogenous states of the world. The learning problem is
placed in the context of an iterative adjustment process which achieves equilibrium
if traders have rational expectations. The main result is that even if traders
begin with no knowledge of their environment, there exists an estimation procedure
which converges to rational expectations when the environment satisfies a certain
regularity condition. The regularity condition is shown to be generic.
Jordan, J.S., (1982), "Learning Rational Expectations: The Finite State Case", Discussion Paper No. 167, Center for Economic Research, Department of Economics, University of Minnesota.
Learning Rational Expectations: The Finite State Case.
Center for Economic Research, Department of Economics, University of Minnesota.
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