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overconfident about the signal. We find that, because overconfident traders introduce an additional source of risk, rational … bonds are an essential accompaniment of equity investment, as they serve to hedge this "sentiment risk." …
Persistent link: https://www.econbiz.de/10012465249
excessively pessimistic. We find that because irrational traders introduce an additional source of risk, rational investors reduce … "sentiment risk." The answer to the question posed in the title is: "There is little that rational investors can do optimally to …
Persistent link: https://www.econbiz.de/10012466868
exchange economy with multiple agents who differ in their degree of risk aversion and face borrowing constraints. We … volatility of stock returns increases with the cross-sectional dispersion of risk aversion, with the cross-sectional dispersion … constraint lowers the risk-free interest rate and raises the equity premium in equilibrium …
Persistent link: https://www.econbiz.de/10012470107
In this article, we examine the effect of the imperfect mobility of goods on international risk sharing and, through … is not monotonic with respect to investors' risk aversion and the aggregate volatility of output growth. Our main result …
Persistent link: https://www.econbiz.de/10012471806