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Learning the CAPM through Bubbles
Kedar-Levy, Haim - Econometric Society - 2004
Bubbles are generally considered the outcome of investor irrationality or informational asymmetry, both objectionable … prices make a lognormal price process that nests the classic CAPM with a potential for endogenous bubbles through learning … might burst to bubbles or decline to near-zero, “pink-sheet†valuations. When the technology shifts phase to generate …
Persistent link: https://www.econbiz.de/10005702759
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Do Heterogeneous Beliefs Matter for Asset Pricing?
Juergens, Jennifer; Anderson, Evan; Ghysels, Eric - Econometric Society - 2004
We study how heterogeneous beliefs affect returns and examine whether heterogeneous beliefs are a priced factor in traditional asset pricing models. To accomplish this task, we suggest new empirical measures based on the disagreement among analysts about expected (short-term and long-term)...
Persistent link: https://www.econbiz.de/10005342284
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Liquidity Discovery and Asset Pricing
Seppi, Duane; Gallmeyer, Michael; Hollifield, Burton - Econometric Society - 2004
Most investors purchase securities knowing they will resell those securities in the future. Uncertainty about the preferences of future trading counter-parties causes randomness in future resale prices that we call liquidity risk. It is natural to suppose that investors are asymmetrically...
Persistent link: https://www.econbiz.de/10005130211
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Limits of Arbitrage: Theory and Evidence from the Mortgage-Backed Securities Market
Vigneron, Olivier; Gabaix, Xavier; Krishnamurthy, Arvind - Econometric Society - 2004
``Limits of Arbitrage" theories require that the marginal investor in a particular asset market be a specialized arbitrageur. Then the constraints faced by this arbitrageur (i.e. capital constraints) feed through into asset prices. We examine the mortgage-backed securities (MBS) market in this...
Persistent link: https://www.econbiz.de/10005130216
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Long-run and Cyclical Dynamics in the US Stock Market
Gil-Alana, L.A.; caporale, G.M. - Econometric Society - 2004
This paper examines the long-run dynamics and the cyclical structure of the US stock market using fractional integration techniques. We implement a version of the tests of Robinson (1994a), which enables one to consider unit (or fractional) roots both at the zero (long-run) and at the cyclical...
Persistent link: https://www.econbiz.de/10005063571
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Media Frenzies in Markets for Financial Information
Veldkamp, Laura - Econometric Society - 2004
Promising emerging equity markets often witness investment herds and frenzies, accompanied by an abundance of media coverage. Complementarity in information acquisition can explain these anomalies. Because information has a high fixed cost of production, its equilibrium price is low when...
Persistent link: https://www.econbiz.de/10005063589
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The Equity Premium and the Baby Boom
Brooks, Robin - Econometric Society - 2004
This paper explores the quantitative impact of the Baby Boom on stock and bond returns. It constructs a neoclassical growth model with overlapping generations, in which agents make a portfolio decision over risky capital and safe bonds in zero net supply. The model has exogenous technology and...
Persistent link: https://www.econbiz.de/10005328938
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Consumption, Portfolio Policies and Dynamic Equilibrium in the Presence of Preference for Ownership
Ehling, Paul - Econometric Society - 2004
In this article we construct a model in which agents exhibit preference for ownership with respect to a durable (house). Ownership is modeled as a continuous function of debt service normalized by the price of the house. We study the utility optimization problem of an investor not endowed with...
Persistent link: https://www.econbiz.de/10005328956
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The Markovian Dynamics of "Smart Money"
Yang, J-H Steffi - Econometric Society - 2004
I develop a Markov model of samrt money chasing past winning funds while taking into account associated costs. The model also allows market capital entry and exit. The steady-state capital allocations re derived using constant transition probabilities. The results sugget that down side risk is...
Persistent link: https://www.econbiz.de/10005086415
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Ignorance, Fixed Costs, and the Stock Market Participation Puzzle
Naudon, Alberto; Tapia, Matías - Econometric Society - 2004
While the existence of fixed costs in entering asset markets is the leading rationalization of the "participation puzzle" -the fact that most households do not hold stocks, despite the diversification gains and the significant risk-premium involved-, most motivations of these fixed costs are as...
Persistent link: https://www.econbiz.de/10005699623