Luca Gerotto

New paper alert! "A Tale of Inattentiveness and the Loss Function: A model for household-level macroeconomic expectations" – joint work with Antonio Paradiso and @paolopellizzari – will appear in print in the August issue of JEBO sciencedirect.com/science/articl… Feedback welcomed! A 🧵

6/6 💡 Why this matters? Understanding these dynamics helps policymakers & forecasters • Explain persistent expectation bias • Emphasize the importance of better communication strategies to minimize costly mis-predictions for least informed individuals

5/6 In an empirical application to unemployment expectations, we test if the theoretical prediction is confirmed, focusing on those countries (BE, FR, DE, IT, US) in which the underlying assumptions on the macro variable are satisfied. Three decades of data support our results.

3/6 Intuition: a substantial fraction of the population faces outdated information that increases uncertainty ➡️ they prefer to overestimate the variable in order to hedge against a costly underestimation ➡️ non-trivial bias observed in consumer surveys

2/6 We present a novel theoretical framework, combining: - Asymmetric loss function: the same absolute prediction error for a macro variable has different effects in case of over- and of underprediction - Inattentiveness: economic agents update their information sets infrequently

New paper alert! "A Tale of Inattentiveness and the Loss Function: A model for household-level macroeconomic expectations" – joint work with Antonio Paradiso and @paolopellizzari – will appear in print in the August issue of JEBO sciencedirect.com/science/articl… Feedback welcomed! A 🧵

A 🧵 will follow once published!

Title: A tale of inattentiveness and the loss function: A model for household-level macroeconomic expectations Journal of Economic Behavior and Organization Dear Professor Paolo Pellizzari, A final disposition of "Accept" has been registered for the above-mentioned manuscript.

Finally, we find that the presence of noise traders leads more agents to be informed to "milk" them. The policy implication is paradoxical: a lower diffusion of noise could decrease the diffusion of reliable information as well. End of 🧵, thanks for reading! n/n

The disequilibrium induced by random replacement of traders exactly compensates the disequilibrium induces by learning from peers, generating a less trivial equilibrium of market shares. 10/n

Happy to share that "Fleeting extinction? Unraveling the persistence of noise traders in financial markets with learning and replacement" (joint w/ @paolopellizzari and Marco Tolotti) is online at J Evol Econ link.springer.com/article/10.100… a 🧵 w/ figs and excerpts from the paper 1/n

📢📢📢The Call for Papers for the #SIEP2025 Congress @UninaIT is open!!! Naples, September 18-19, 2025. Submit your paper by May 30, 2025. Call at siepweb.it/siep/wp/en/en/… Further info at siepweb.it/siep/wp/en/en/… #EconTwitter @econ_conf #AcademicChatter