Testing rational expectations hypothesis in the manufacturing sector in Malaysia

Puah, Chin Hong and Wong, Shirly Siew-Ling and Liew, Venus Khim-Sen (2013) Testing rational expectations hypothesis in the manufacturing sector in Malaysia. Journal of Business Economics and Management, 14 (2). pp. 303-316. ISSN 2029-4433


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Official URL: http://www.tandfonline.com/doi/abs/10.3846/1611169...


The application of rational expectations hypothesis (REH) in macroeconomic research has marked a revolution in economic thinking, and the magnitude of its impact on the world of economics is undeniably significant. However, the extent to which REH applies in real-world settings is ambiguous even though the concept of REH is well established in economics literature because empirical evidence from previous studies is clearly mixed. This study used survey data on gross revenue and capital expenditures to examine the validity of REH in Malaysian manufacturing business expectations. Empirical results indicated that the manufacturers’ expectations are being irrationally constructed in terms of gross revenue predictions but comply with REH properties in Muth's sense in the case of capital expenditures forecasts. Therefore, manufacturing firms in Malaysia are encouraged to incorporate more relevant information into their gross revenue predictions to provide more accurate and realistic forecasting.

Item Type: Article
Uncontrolled Keywords: rational expectations hypothesis, unbiasedness test, non-serial correlation test, weak-form efficiency test, unimas, university, universiti, Borneo, Malaysia, Sarawak, Kuching, Samarahan, ipta, education, research, Universiti Malaysia Sarawak
Subjects: H Social Sciences > H Social Sciences (General)
Divisions: Academic Faculties, Institutes and Centres > Faculty of Economics and Business
Faculties, Institutes, Centres > Faculty of Economics and Business
Depositing User: Ab Rahim
Date Deposited: 06 Oct 2017 00:42
Last Modified: 06 Oct 2017 00:42
URI: http://ir.unimas.my/id/eprint/18022

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