Kent Osband's "Rationally Turbulent Expectations" Explores Bayesian Learning with Calm and Turbulent Phases
If you only eat one bagel today, this is the bagel.
Summary
Kent Osband summarizes his research on "rational turbulence" in a new book, building on work previously linked by the blog. The key finding is that Bayesian learning, when accounting for even tiny doubts about the stability of an i.i.d. process, alternates between calm and turbulent phases with fast learning periods. The book is published affordably in color print, with all chapters freely available on SSRN.
Key quotes
· 3 pulledAbout 15 years ago you kindly linked an article I wrote on 'rational turbulence.'
I have published it as cheaply as color printing allows and also posted all chapters for free on ssrn, starting with this overview.
The main finding... is that–once we allow for even tiny doubts about the the stability of an iid process–Bayesian learning has calm and turbulent phases, with fast learning.
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