Showing 1 - 8 of 8
We show that Treasury security prices in the secondary market decrease significantly before auctions and recover shortly after. Hence, Treasury security prices tend to be lower on auction days, implying a large issuance cost for the Treasury Department, which is estimated to be 9-18 basis points...
Persistent link: https://www.econbiz.de/10008917661
This paper analyzes a model of fund managers' reputation concerns. It explains why "Nickel strategies" (strategies that earn small positive returns most of the time but occasionally lead to dramatic losses) are more popular among managers than the opposite "Black Swan strategies," (strategies...
Persistent link: https://www.econbiz.de/10008852933
This article analyzes the implications of money illusion for investor behavior and asset prices in a securities market economy with inflationary fluctuations. We provide a belief-based formulation of money illusion which accounts for the systematic mistakes in evaluating real and nominal...
Persistent link: https://www.econbiz.de/10008852956
Can investors with incorrect beliefs survive in financial markets and have a significant impact on asset prices? My paper addresses this issue by analyzing a dynamic general equilibrium model where some investors have rational expectations while others have incorrect beliefs concerning the mean...
Persistent link: https://www.econbiz.de/10008852961
This paper analyzes a dynamic general equilibrium model to study the impact of earnings surprises on contemporaneous stock returns. The model shows that earnings surprises can affect stock returns through two channels. On the one hand, earnings surprises affect the expected future earnings of...
Persistent link: https://www.econbiz.de/10008853007
This paper presents a dynamic equilibrium model of bond markets in which two groups of agents hold heterogeneous expectations about future economic conditions. The heterogeneous expectations cause agents to take speculative positions against each other and therefore generate endogenous relative...
Persistent link: https://www.econbiz.de/10008854001
The idea that uncertainty about a firm’s long-run profitability could increase its stock valuation has been proposed by Pastor and Veronesi (2003) to explain a number of phenomena in financial markets. We further examine this idea by analyzing a simple valuation model for both stocks and...
Persistent link: https://www.econbiz.de/10008854004
Conventional wisdom suggests that investors' independent biases should cancel each other out and have little impact on equilibrium at the aggregate level. In contrast to this intuition, this paper analyzes models with biased investors and finds that biases often have a significant impact on the...
Persistent link: https://www.econbiz.de/10008854026