Expectations formation and risk in three financial markets: Surveying whatthe surveys say

This paper attempts to provide a logical overview of the literature which e xploits survey data to examine issues of expectations formation and risk av ersion in financial markets. Our survey suggests that: short term expectati ons are excessively volatile and exhibit bandwagon effects, while longer te rm expectations appear to be regressive and therefore stabilising; in bond and foreign exchange markets the standard result of forward rate biasedness is due in part to time-varying premia; recent research using disaggregate foreign exchange survey data demonstrates the importance of heterogeneous e xpectations.