Chen, Carl; Lung, Peter; Wang, F. - In: Review of Quantitative Finance and Accounting 41 (2013) 4, pp. 631-650
Using a simple dividend model, we illustrate and synthesize the sources of stock market mispricing and excess volatility based upon two hypotheses—inflation illusion and heterogeneous beliefs. Our theoretical framework posits that equity mispricing arises when investors have subjective...