Similar Search Results

Brunnermeier, Markus K; Julliard, Christian - C.E.P.R. Discussion Papers - 2007

A reduction in inflation can fuel run-ups in housing prices if people suffer from money illusion. For example … account that inflation lowers future real mortgage costs. We decompose the price-rent ratio in a rational component — meant to … capture the proxy effect and risk premia — and an implied mispricing. We find that inflation and nominal interest rates …

Persistent link: https://www.econbiz.de/10005067397

Money Illusion and Coordination Failure

Fehr, Ernst; Tyran, Jean-Robert - C.E.P.R. Discussion Papers - 2004

Economists long considered money illusion to be largely irrelevant. Here we show, however, that money illusion has powerful effects on equilibrium selection. If we represent pay-offs in nominal terms, choices converge to the Pareto inefficient equilibrium; however, if we lift the veil of money...

Persistent link: https://www.econbiz.de/10005791766

Equilibrium Asset Prices and Investor Behavior in the Presence of Money Illusion

Basak, Suleyman; Yan, Hongjun - C.E.P.R. Discussion Papers - 2009

inflation, the real short rate is negatively correlated with realized inflation, and money illusion may induce predictability …

Persistent link: https://www.econbiz.de/10005048554

Does Money Illusion Matter? An Experimental Approach

Fehr, Ernst; Tyran, Jean-Robert - C.E.P.R. Discussion Papers - 2000

Money illusion means that people behave differently when the same objective situation is represented in nominal terms rather than in real terms. This paper shows that seemingly innocuous differences in payoff representation cause pronounced differences in nominal price inertia indicating the...

Persistent link: https://www.econbiz.de/10005504787

“At least I didn’t lose money” Nominal Loss Aversion Shapes Evaluations of Housing Transactions

Stephens, Thomas A; Tyran, Jean-Robert - C.E.P.R. Discussion Papers - 2012

Loss aversion is one of the most robust findings to have emerged from behavioral economics. Surprisingly little attention, however, has been devoted to nominal loss aversion, the interaction of loss aversion and money illusion. People tend to think of transactions in terms of their nominal...

Persistent link: https://www.econbiz.de/10011083826

Learning, Endogenous Indexation and Disinflation in the New-Keynesian Model

Wieland, Volker - C.E.P.R. Discussion Papers - 2008

episode price-setting firms' expect inflation to be highly persistent and opt for backward-looking indexation. As the central … that choose the rate for indexation also re-assess the likelihood that announced inflation targets determine steady …-state inflation and adjust indexation of contracts accordingly. A strategy of announcing and pursuing short-term targets for inflation …

Persistent link: https://www.econbiz.de/10005114241

Entry Mistakes, Entrepreneurial Boldness and Optimism

Brocas, Isabelle; Carrillo, Juan D - C.E.P.R. Discussion Papers - 1999

We analyze the investment decision of a population of time inconsistent entrepreneurs who overweight current payoffs relative to future returns. We show that, in order to avoid inefficient procrastination, agents may find it optimal to keep optimistic priors about their chances of success and...

Persistent link: https://www.econbiz.de/10005791696

Earnings Management to Exceed Thresholds

Degeorge, François; Patel, U; Zeckhauser, Richard - C.E.P.R. Discussion Papers - 1998

Investors are keenly interested in financial reports of earnings because earnings provide important information for investment decisions. Thus, executives who are monitored by investors and directors face strong incentives to manage earnings. We introduce consideration of...

Persistent link: https://www.econbiz.de/10005792487

The Real Effects of Investor Sentiment

Polk, Christopher; Sapienza, Paola - C.E.P.R. Discussion Papers - 2003

Does inefficiency of financial markets have real consequences? Or does it only result in transfers of wealth from noise traders to arbitrageurs? We study firm business investment to address this question. In our model, benevolent managers of overvalued companies invest in projects with negative...

Persistent link: https://www.econbiz.de/10005067581

Do Individual Investors Have Asymmetric Information Based On Work Experience?

Døskeland, Trond; Hvide, Hans K - C.E.P.R. Discussion Papers - 2009

Using a novel and unique dataset from Norway, we analyze whether professional proximity is associated with asymmetric information and abnormal returns. We find that individuals hold an excess weight in stocks that are professionally close. For example, after excluding holdings of own-company and...

Persistent link: https://www.econbiz.de/10005068286