Adam, Klaus; Marcet, Albert; Beutel, Johannes - Barcelona Graduate School of Economics (Barcelona GSE) - 2015
peaks and excessive pessimism at market troughs. Formally incorporating subjective price beliefs into an otherwise standard … prices from their fundamental value and give rise to asset price booms that ultimately result in a price bust. The model … quantitatively replicates (1) the volatility of stock prices and (2) the positive correlation between the price dividend ratio and …