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Asset Pricing under Rational Learning about Rare Disasters

Koulovatianos, Christos; Wieland, Volker - C.E.P.R. Discussion Papers - 2011

. Bayesian learning implies that beliefs about the likelihood of rare disasters drop to a much more pessimistic level once a … disaster has occurred. Such a shift in beliefs can trigger massive declines in price-dividend ratios. Pessimistic beliefs … between rational and adaptive Bayesian learning. Rational learners account for the possibility of future changes in beliefs in …

Persistent link: https://www.econbiz.de/10009201120

Globalization and Cooperative Relations

Spagnolo, Giancarlo - C.E.P.R. Discussion Papers - 2002

Globalization – improved access to integrated, anonymous markets – is claimed to crowd out cooperative relations: from reciprocal exchange to lifetime employment, from relational governance to corruption/collusion. We study how agents’ intertemporal preferences and their access to markets...

Persistent link: https://www.econbiz.de/10005136656

Constrained Discretion and Central Bank Transparency

Bianchi, Francesco; Melosi, Leonardo - C.E.P.R. Discussion Papers - 2014

pessimistic about future monetary policy and uncertainty gradually rises. Reputation determines the speed with which agents …

Persistent link: https://www.econbiz.de/10011084074

Strategic Experimentation with Exponential Bandits

Cripps, Martin William; Keller, R Godfrey; Rady, Sven - C.E.P.R. Discussion Papers - 2003

experimentation in any equilibrium where the players use stationary Markovian strategies with posterior beliefs as the state variable … novel feature that it rises as players become more pessimistic. Finally, over the range of beliefs where players use both …

Persistent link: https://www.econbiz.de/10005124141

Learning and the Great Moderation

Bullard, James B.; Singh, Aarti - C.E.P.R. Discussion Papers - 2009

We study a stylized theory of the volatility reduction in the U.S. after 1984 - the Great Moderation - which attributes part of the stabilization to less volatile shocks and another part to more difficult inference on the part of Bayesian households attempting to learn the latent state of the...

Persistent link: https://www.econbiz.de/10005048557

Learning to Forget? Contagion and Political Risk in Brazil

Miller, Marcus; Thampanishvong, Kannika; Zhang, Lei - C.E.P.R. Discussion Papers - 2003

We examine whether Brazilian sovereign spreads of over 20% in 2002 could be due to contagion from Argentina or to domestic politics, or both. Treating unilateral debt restructuring as a policy variable gives rise to the possibility of self-fulfilling crisis, which can be triggered by contagion....

Persistent link: https://www.econbiz.de/10005497989

An Equilibrium Model of the African HIV/AIDS Epidemic

Greenwood, Jeremy; Kircher, Philipp; Santos, Cezar; … - C.E.P.R. Discussion Papers - 2013

Eleven percent of the Malawian population is HIV infected. Eighteen percent of sexual encounters are casual. A condom is used one quarter of the time. A choice-theoretic general equilibrium search model is constructed to analyze the Malawian epidemic. In the developed framework, people select...

Persistent link: https://www.econbiz.de/10011084502

Option Prices under Bayesian Learning: Implied Volatility Dynamics and Predictive Densities

Guidolin, Massimo; Timmermann, Allan G - C.E.P.R. Discussion Papers - 2001

This Paper shows that many of the empirical biases of the Black and Scholes option pricing model can be explained by Bayesian learning effects. In the context of an equilibrium model where dividend news evolves on a binomial lattice with unknown but recursively updated probabilities, we derive...

Persistent link: https://www.econbiz.de/10005792421

Negatively Correlated Bandits

Klein, Nicolas; Rady, Sven - C.E.P.R. Discussion Papers - 2008

We analyze a two-player game of strategic experimentation with two-armed bandits. Each player has to decide in continuous time whether to use a safe arm with a known payoff or a risky arm whose likelihood of delivering payoffs is initially unknown. The quality of the risky arms is perfectly...

Persistent link: https://www.econbiz.de/10005662209

Strategic Trading And Learning About Liquidity

Hong, Harrison G; Rady, Sven - C.E.P.R. Discussion Papers - 2000

lead to revisions of informed traders' beliefs in favour of the low liquidity state. (2) This revision in beliefs results …

Persistent link: https://www.econbiz.de/10005666969

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