Working Paper
A Robust Hansen-Sargent Prediction Formula
Abstract: This paper derives a formula for the optimal forecast of a discounted sum of future values of a random variable. This problem reflects a preference for robustness in the presence of (unstructured) model uncertainty. The paper shows that revisions of a robust forecast are more sensitive to new information, and discusses the relevance of this result to previous findings of excess sensitivity of consumption and asset prices to new information.
Status: Published in Economics Letters (April 2001, v. 71 no. 1, p43-48)
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https://www.frbsf.org/research-and-insights/publications/working-papers/2000/12/a-robust-hansen-sargent-prediction-formula/
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https://doi.org/10.1016/S0165-1765(00)00411-0
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Provider: Federal Reserve Bank of San Francisco
Part of Series: Working Paper Series
Publication Date: 2000-12-31
Number: 2000-11