A robust Hansen-Sargent prediction formula

This paper derives a formula for the optimal forecast of a discounted sum o f future values of a random variable, where optimal is defined in terms of the minimized H-infinity-norm of the forecast error. This problem reflects a preference for robustness in the presence of (unstructured) model uncerta inty. The paper shows that revisions of a robust forecast are more sensitiv e to new information, and discusses the relevance of this result to previou s findings of excess sensitivity of consumption and asset prices to new inf ormation. (C) 2001 Elsevier Science B.V, All rights reserved.