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Testing the Rational Expectations Hypothesis on the Retail Trade Sector Using Survey Data from Malaysia

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  • Puah, Chin-Hong
  • Chong, Lucy Lee-Yun
  • Jais, Mohamad

Abstract

The rational expectations hypothesis states that when people are expecting things to happen, using the available information, the predicted outcomes usually occur. This study utilized survey data provided by the Business Expectations Survey of Limited Companies to test whether forecasts of the Malaysian retail sector, based on gross revenue and capital expenditures, are rational. The empirical evidence illustrates that the decision-makers expectations in the retail sector are biased and too optimistic in forecasting gross revenue and capital expenditures.

Suggested Citation

  • Puah, Chin-Hong & Chong, Lucy Lee-Yun & Jais, Mohamad, 2011. "Testing the Rational Expectations Hypothesis on the Retail Trade Sector Using Survey Data from Malaysia," MPRA Paper 36699, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:36699
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    References listed on IDEAS

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    Cited by:

    1. Puah, Chin-Hong & Wong, Shirly Siew-Ling & Habibullah, Muzafar Shah, 2012. "Rationality of business operational forecasts: evidence from Malaysian distributive trade sector," MPRA Paper 37599, University Library of Munich, Germany.
    2. Chong, Lucy Lee-Yun & Puah, Chin-Hong & Md Isa, Abu Hassan, 2012. "Theory of rational expectations hypothesis: banks and other financial institutions in Malaysia," MPRA Paper 36657, University Library of Munich, Germany.
    3. Chin-Hong Puah & Shirly Siew-Ling Wong & Venus Khim-Sen Liew, 2013. "Testing rational expectations hypothesis in the manufacturing sector in Malaysia," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 14(2), pages 303-316, April.

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    More about this item

    Keywords

    REH; Unbiasedness; Non-serial Correlation; Weak-form Efficiency;
    All these keywords.

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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