Overreaction and Diagnostic Expectations in Macroeconomic - Andrei Shleifer

Summer 2022, Paper: "Dynamic macroeconomics is one of the great accomplishments of twentieth century social science. It recognizes the centrality of forward-looking behavior for investment, consumption, and other major decisions of consumers and firms. The bedrock assumption of this research program is that expectations are “rational,” meaning that decision-makers make optimal use of available information when making their forecasts. Indeed, this research program is often referred to as the “rational expectations revolution” (Lucas and Sargent 1981)."

Non-HKS Harvard Faculty Website - Andrei Shleifer