Working Paper
Heterogeneous Expectation Uncertainty and News Shock (Job Market Paper)
Abstract: In this paper, I document systematic differences in households’ individual belief uncertainty regarding macroeconomic conditions and its relation to portfolio choices. I develop a heterogeneous agent New Keynesian model characterized by endogenous information acquisition and portfolio allocation. I demonstrate how the impact of an anticipated TFP shock is amplified through heterogeneous expectations. Quantitatively, the model aligns with observed household uncertainty and portfolio shares. Compared to a representative agent model, the impact of an anticipated TFP shock is amplified by nearly two times.
Expectation and Confusion: Evidence and Theory, with Heng Chen. (R&R at Journal of Economic Theory)
Abstract: We characterize how forecasters form expectations when they cannot perfectly distinguish between trends and cycles. This model is motivated by a set of findings from the Survey of Professional Forecasters, which reveal various patterns in forecasting behaviors across different forecast horizons. These facts are inconsistent with the common assumption in the expectation formation literature that trends are stable or observable. Our framework can be applied to account for changes in forecasting behavior following the introduction of explicit inflation targeting in 2012. We also extend the model to incorporate behavioral biases so as to address empirical puzzles documented in the literature.
Working in Progress
Overreaction or underreaction? Evidence from consumption behavior. (with Heng Chen, Yibo Meng, Shihan Xie.)
Heterogeneous perceived expectation: Evidence from 10-K filings.