Knowing how expectations are formed in the financial markets is crucial to understanding how
financial markets work. Although the market price itself reflects to some extent expectations
market expectations cannot be observed directly. Nonetheless different strategies remain to
investigate expectations in financial markets in more detail. This book uses survey data which
allow a detailed analysis of market's expectations since it provides information of
expectations of individual economic agents. This book focuses on the two major financial
markets in terms of trading volume namely the foreign exchange market and the money market.
Since these markets can be regarded as highly liquid and market participants have equal access
to information both markets can be regarded as appropriate candidates to investigate the
expectation formation process.
