Expectations and Forming Expectations on the Financial Markets

From 15 to 17 June 2010, ZEW hosted its Summer Workshop for Young Economist for the twelfth year in a row. This year the event was run by the ZEW Research Department “International Finance and Financial Management”. The focus of the workshop was on “Expectations and Forming Expectations on the Financial Markets”. ZEW received sponsorship for the event from the Stiftung Geld und Währung.

The workshop offered 14 young researchers the opportunity to present and discuss their research papers. A number of participants travelled thousands of miles to attend, including one researcher from Chile and three from the United States. The up-and-coming researchers received feedback and suggestions for their papers from three internationally renowned economists who acted as tutors during the workshop: Christian Gollier from the University of Toulouse, Peter Norman Sørensen from the University of Copenhagen and Kajal Lahiri from the University of Albany, SUNY.

Each of the three tutors gave two 90-minutes lectures on their research interests. Peter Norman Sørensen’s fields of interest include how experts distort their subjective best prognoses in order to make themselves look like better forecasters. Christian Gollier is interested in “optimal expectations”, that is, how economic entities can enhance their anticipation by choosing to view the desired outcome of their negotiations as more likely than less desirable outcomes. Kajal Lahiri conducts research on how to examine data on expectations using econometrics. One of his research aims is to reach a better understanding of the heterogeneity of individual expectations.

In their presentations, the young researchers tackled the topic of “Expectations and Forming Expectations on the Financial Markets” from a number of different angles. These included papers looking at the influence of various types of expectation formation on the economic effectiveness of monetary policy, the formation of expectations in experimental financial markets as well as how to predict economic variables with the help of expectation data.

Xuguang Sheng receives the Heinz König Young Scholar Award 2010

As part of the ZEW Summer Workshop, the Heinz König Young Scholar Award was awarded for the seventh time. The award, this year sponsored by Deutsche Telekom, went to Xuguang Sheng from the United States. In his prize-winning paper, Sheng looked at the relationship between economic uncertainty and the distribution of expert prognoses. Sheng is a lecturer at American University in Washington D.C. His paper focuses on the question of why economic experts so often differ in opinion and how this disagreement is linked to risks related to future economic development. It was Sheng and his co-authors Kajal Lahiri and Huaming Peng’s answer to the latter question in particular that represented a significant contribution to a long-running debate in economics.

The Heinz König Young Scholar Award is named after the ZEW founding director, Prof. Dr. Dr. h.c. Heinz König, who died in 2002. The prize recognises excellent empirical papers written by young economists. The annual ZEW award comes with a prize of 5,000 euros and also includes the opportunity to conduct a research visit at ZEW for several months.