Published American Economic Review Published Apr 2026Real Credit CyclesPedro Bordalo · Nicola Gennaioli · Andrei Shleifer · Stephen J. TerryThis paper incorporates diagnostic expectations — beliefs that overweight the representativeness of recent data, formalized as $E_t^\theta(A_{t+1}) = E_t(A_{t+1}) + \theta[E_t(A_{t+1}) - …