Topic：New Tests of Expectation Formation with Applications to Asset Pricing Models
Speaker： Zhang Tongbin， Shanghai University of Finance and Economics
Time：13:30-14:45
Date： March 15，2019
Venue：Room 106B, Zhonghui Building

Introduction to Speaker：
Prof. Zhang received his PhD at Universitat Autonoma de Barcelona, Spain and joined Shanghai University of Finance and Economics as Assistant Professor of Economics in 2017. He obtained a BA in Finance at Zhejiang Gongshang University, and a MA in Economics at Shanghai University of Finance and Economics. His research field focuses on macroeconomic and financial economics, specifically the role of expectation in asset pricing.
 
Abstract：
The paper develops new tests of expectation formation which are generally applicable in financial and macroeconomic models. The tests utilize cointegration restrictions among forecasts of model variables. Survey data suggests forecasts of stock prices are not cointegrated with forecasts of consumption and rejects this aspect of the formation of stock price expectations in a wide range of asset pricing models, including rational expectations and various learning or sentiment-based models. We show adding sentiment (or judgment) directly to subjective stock price forecasts can reconcile equity pricing models with the new survey evidence.