Fundamental uncertainty wreaks havoc for empirical models. Julio said he found a couple, but I do not think that we would find them very convincing.
Rational expectations, by contrast, makes for great simplification for modelers. So besides showing how markets are supposedly efficient, rational expectations is attractive for those who want to display how they can make a model work. Last week, the Wall Street Journal had an article indicating that even Fama is relenting on rational expectations. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu
