Survey evidence on the rationality of business expectations on Malaysian agricultural sector

Are business forecasts of the construction sector rational? Survey-based evidence from Malaysia

“…Nevertheless, it is interesting to note that optimistic bias in capital expenditure forecasts is rather typical in Malaysian business since previous studies by Habibullah (2003), Wong et al (2011), Puah et al (2013), and Chong et al (2012) have consistently revealed that business firms in other economic sectors also confront upward bias in capital expenditure forecasts. Wong et al (2011) regarded optimistic bias as a business goal to make the business outlook more attractive to potential investors, as optimistic capital expenditures reflect stronger business cultivation for the near future. Eventually, goals tend to compromise accuracy.…”

“…Those studies were carried out in two decades ago when the Malaysian economy was commodities-dominated and yet to enter into a rigorous transformation. Some recent studies by Puah, Chong, and Jais (2011), Wong, Puah, and Abu Mansor (2011), Chong, Puah, and Md Isa (2012), and Puah, Wong, and Liew (2013) have heightened the notion of forecast rationality in Malaysia's real and financial sectors. Nevertheless, the construction sector has had un-assessed business operational forecasts since the first and only work of Habibullah (1994a).…”

Testing Rational Expectations Hypothesis in the Manufacturing Sector in Malaysia

“…For instance, via indirect measure of expectations, Ghaffar and Habibullah (1987), and Habibullah (1988) evidenced that rational forecasts hold true for price expectations within the frameworks of Malaysian money demand as well as loan decisions formed by agricultural producers in Malaysia. On the other hand, using direct test approach, Habibullah (1994Habibullah ( , 1996Habibullah ( , 2001), Puah et al (2011) and Wong et al (2011) studied REH in Malaysia's agricultural and business sectors through survey series of business expectations, while Marais, Smit and Conradie (1997) performed a micro-level test on REH in South Africa. Notwithstanding, additional study on this research topic to supplement past studies is indeed essential to provide better insight into the understanding of expectation formation mechanisms in developing countries.…”