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(Ir)Rational Exuberance: Optimism, Ambiguity and Risk

Bracha, Anat; Brown, Donald J. - Cowles Foundation for Research in Economics, Yale University - 2013

The equilibrium prices in asset markets, as stated by Keynes (1930): "...will be fixed at the point at which the sales of the bears and the purchases of the bulls are balanced." We propose a descriptive theory of finance explicating Keynes' claim that the prices of assets today equilibrate the...

Persistent link: https://www.econbiz.de/10010895648

Affective Utilities: A Rational Theory of Optimistic Bias in Asset Markets

Bracha, Anat; Brown, Donald J. - Cowles Foundation for Research in Economics, Yale University - 2013

Persistent link: https://www.econbiz.de/10010895651

Keynesian Utilities: Bulls and Bears

Bracha, Anat; Brown, Donald J. - Cowles Foundation for Research in Economics, Yale University - 2013

We propose Keynesian utilities as a new class of non-expected utility functions representing the preferences of investors for optimism, defined as the composition of the investor's preferences for risk and her preferences for ambiguity. The optimism or pessimism of Keynesian utilities is...

Persistent link: https://www.econbiz.de/10010895668

Changing Times, Changing Values: A Historical Analysis of Sectors within the US Stock Market 1872-2013

Bunn, Oliver D.; Shiller, Robert J. - Cowles Foundation for Research in Economics, Yale University

We construct a price, dividend, and earnings series for the Industrials sector, the Utilities sector, and the Railroads sector from the beginning of the 1870s until the beginning of the year 2013 from primary sources. To infer about mispricings in the sector markets over more than a century, we...

Persistent link: https://www.econbiz.de/10010817215

On the Evolution of Overconfidence and Entrepreneurs

Bernardo, Antonio E.; Welch, Ivo - Cowles Foundation for Research in Economics, Yale University - 2001

depends on the size of the group, on the degree of overconfidence, and on the accuracy of individuals' private information …

Persistent link: https://www.econbiz.de/10005762537

Morale Hazard

Fang, Hanming; Moscarini, Giuseppe - Cowles Foundation for Research in Economics, Yale University - 2003

overconfidence on the firm's optimal wage-setting policies. In our model, wage contracts both provide incentives and affect worker …-differentiation wage policy to be profit-maximizing. In numerical examples, worker overconfidence is a necessary condition for the firm to … more worker overconfidence; finally, wage compression is more likely when aggregate productivity is low. …

Persistent link: https://www.econbiz.de/10005762554

I'll See It When I Believe It - A Simple Model of Cognitive Consistency

Yariv, Leeat - Cowles Foundation for Research in Economics, Yale University - 2002

Psychological experiments demonstrate that people exhibit a taste for consistency. Individuals are inclined to interpret new evidence in ways that confirm their pre-existing beliefs. They also tend to change their beliefs to enhance the desirability of their past actions. I present a model that...

Persistent link: https://www.econbiz.de/10005463891

The Stabilization of the U.S. Economy: Evidence from the Stock Market

Shapiro, Matthew D. - Cowles Foundation for Research in Economics, Yale University - 1988

Until recently, economists widely believed that economic activity had become less variable in the United States following the end of World War II. Challenging this belief, new research suggests that key historical time series are spuriously volatile, a finding that is highly controversial. Data...

Persistent link: https://www.econbiz.de/10005762560

Valuation Ratios and the Long-run Stock Market Outlook: An Update

Campbell, John Y.; Shiller, Robert J. - Cowles Foundation for Research in Economics, Yale University - 2001

The use of price-earnings ratios and dividend-price ratios as forecasting variables for the stock market is examined using aggregate annual US data 1871 to 2000 and aggregate quarterly data for twelve countries since 1970. Various simple efficient-markets models of financial markets imply that...

Persistent link: https://www.econbiz.de/10005762739

The Life-Cycle Personal Accounts Proposal for Social Security: An Evaluation

Shiller, Robert J. - Cowles Foundation for Research in Economics, Yale University - 2005

The life-cycle accounts proposal for Social Security reform has been justified by its proponents using a number of different arguments, but these arguments generally involve the assumption of a high likelihood of good returns on the accounts. A simulation is undertaken to estimate the...

Persistent link: https://www.econbiz.de/10005762740