Brunnermeier, Markus K.; Parker, Jonathan A. - Woodrow Wilson School of Public and International … - 2002
This paper introduces a tractable, structural model of subjective beliefs. Since agents that plan for the future care … overestimate the return of their investment and under diversify. In general equilibrium, agents’ prior beliefs are endogenously … and overoptimistic, and consume more than implied by rational beliefs early in life. Third, in choosing when to undertake …