Loss Aversion, Adaptive Beliefs, and Asset Pricing Dynamics
نویسندگان
چکیده
منابع مشابه
Asset Pricing with Loss Aversion∗
Using standard preferences for asset pricing has not been very successful in matching asset price characteristics such as the risk-free interest rate, equity premium and the Sharpe ratio to time series data. Behavioral finance has recently proposed more realistic preferences such as those with loss aversion. Research is starting to explore the implications of behaviorally founded preferences fo...
متن کاملGain, Loss and Asset Pricing
In this paper we develop an approach to asset pricing in incomplete markets that gives the modeller the flexibility to control the tradeoff between the precision of equilibrium models and the credibility of no-arbitrage methods. We rule out the existence of investment opportunities that are very attractive to a benchmark investor. The key feature of our approach is the measure of attractiveness...
متن کاملLoss aversion, survival and asset prices
This paper studies the wealth and pricing implications of loss aversion in the presence of arbitrageurs with Epstein-Zin preferences. Our analysis shows that if loss aversion is the only difference in investors’ preferences, then for empirically relevant parameter values, loss-averse investors will be driven out of the market and do not affect long run prices. The selection process is slow in t...
متن کاملCognitive Biases, Ambiguity Aversion and Asset Pricing in Financial Markets∗
The behavior of agents in financial markets often displays biases or errors; for example, agents frequently do not compute probabilities correctly. However, we argue that these biases/errors are not always reflected in prices. In particular, we hypothesize that agents who make errors in computing probabilities lose confidence in their probability estimates when they face market prices that are ...
متن کاملGrowth Uncertainty, Generalized Disappointment Aversion and Production-based Asset Pricing
We study a production economy with regime switching in the conditional mean and volatility of productivity growth. The representative agent has generalized disappointment aversion (GDA) preferences. We show that volatility risk in productivity growth carries a positive and sizable risk premium in levered equity. Our model can endogenously generate long-run risks in the volatility of consumption...
متن کاملذخیره در منابع من
با ذخیره ی این منبع در منابع من، دسترسی به آن را برای استفاده های بعدی آسان تر کنید
ژورنال
عنوان ژورنال: Advances in Decision Sciences
سال: 2015
ISSN: 2090-3359,2090-3367
DOI: 10.1155/2015/971269