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Pangenesis rational expectations Forex

Waiting (expectations) - opinion or speculation as to the future performance of economic change. Undefined behavior of the market and its participants, creates mood economic conjectures , the best for their activities. Balance in the ecosystem of the market, achieved a symbiosis of erroneous expectations and reliable. Taking decisions and acting on the basis of erroneous expectations, market participants can "shake" the state of its economy.

Assumption of rational expectations

Developed in 1961 by Professor J. Mutom hypothesis of rational expectations, based on the principle of acquisition, processing and optimization of information for forming opinions in the future, the development of market needs.

The principle is based on expectations that the players, predicting future events, eliminate errors in the system. Market participants use the information, and build on their promising her judgment to the point as the cost of information and the subsequent processing will not exceed the profits.

In a situation where there is information, but there is no ambiguity, rational expectations hypothesis is entering the phase behavior of perfect: perfect behavior.

Two fundamental principles of rational expectations pangenesis
In a situation where the law of oscillations observed variable is changed, the method of forming expectations about the variable, is also changing.
Predicted average error is zero, and can not be predicted in advance.

This hypothesis is related to the concept of an efficient market - efficient market concept. In a situation where current asset prices allow obtaining objective information, the possibility of profit, de facto excluded.

The law of the random walk, wandering provokes market prices. This is reflected in the so-called statistical expectations. This is a situation when the conditional variable, rests on the same level. But this idealized model, this is very far from the realities of modern financial markets.

Why? First, market participants may have access to all available information, but do not use it in the best way. Second, economic agents may miss some important information. Based on this, will lead up - the nicest forecast will never be the most accurate.


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