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Self-Fulfilling Expectations and Fluctuations in Aggregate Demand
Woodford, Michael - 2010
The paper presents an intertemporal general equilibrium model with rationing in the product market, in which stationary sunspot equilibria are shown to exist, indicating the possibility of fluctuations in economic activity simply due to self-fulfilling variations in economic agents'...
Persistent link: https://www.econbiz.de/10013138365
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From Centrally-Planned to Market Economies : The Road from Cpe to Pcpe
Calvo, Guillermo A. - 2010
This paper deals with the early stages of transformation of centrally-planned economies (CBEs) into market economies during which expectations playa key role. It focuses on the transitional phase during which the economy is not any more a CPE but has not yet become a market economy. During this...
Persistent link: https://www.econbiz.de/10013139423
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Portfolio Inefficiency and the Cross-Section of Expected Returns
Kandel, Shmuel - 2011
A plot of expected returns versus betas obeys virtually no relation to an inefficient index portfolio's mean-variance location. If the index portfolio is inefficient, then the coefficients and R- squared from an ordinary-least-squares regression of expected returns on betas can equal essentially...
Persistent link: https://www.econbiz.de/10013118691
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How to Solve Dynamic Stochastic Models Computing Expectations Just Once
Judd, Kenneth L. - 2011
We introduce a technique called "precomputation of integrals" that makes it possible to compute conditional expectations in dynamic stochastic models in the initial stage of the solution procedure. This technique can be applied to any set of equations that contains conditional expectations, in...
Persistent link: https://www.econbiz.de/10013119813
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Uncertainty Equivalents : Testing the Limits of the Independence Axiom
Andreoni, James - 2011
-Expected Utility theories, we strongly reject Prospect Theory probability weighting, we support disappointment aversion if amended to …
Persistent link: https://www.econbiz.de/10013121044
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Disagreement and Asset Prices
Carlin, Bruce I. - 2012
How do differences of opinion affect asset prices? Do investors earn a risk premium when disagreement arises in the market? Despite their fundamental importance, these questions are among the most controversial issues in finance. In this paper, we use a novel data set that allows us to directly...
Persistent link: https://www.econbiz.de/10013096485
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Speculative Betas
Hong, Harrison G. - 2012
We provide a model for why high beta assets are more prone to speculative overpricing than low beta ones. When investors disagree about the common factor of cash-flows, high beta assets are more sensitive to this macro-disagreement and experience a greater divergence-of-opinion about their...
Persistent link: https://www.econbiz.de/10013097774
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Guns, Latrines, and Land Reform : Private Expectations and Public Policy
Kremer, Michael - 2016
Dynamically and statically optimal Pigouvian subsidies on durables will differ in a growing economy. For durables with positive externalities, such as sanitation, statically optimal subsidies will typically grow. However, in a dynamic game, governments can most cheaply induce optimal purchasing...
Persistent link: https://www.econbiz.de/10013000512
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Sticky Expectations and Consumption Dynamics
Carroll, Christopher D. - 2018
Macroeconomic models often invoke consumption “habits” to explain the substantial persistence of aggregate consumption growth. But a large literature has found no evidence of habits in microeconomic datasets that measure the behavior of individual households. We show that the apparent...
Persistent link: https://www.econbiz.de/10012925895
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Salience Theory of Choice Under Risk
Bordalo, Pedro - 2015
We present a theory of choice among lotteries in which the decision maker's attention is drawn to (precisely defined …) salient payoffs. This leads the decision maker to a context-dependent representation of lotteries in which true probabilities … are replaced by decision weights distorted in favor of salient payoffs. By endogenizing decision weights as a function of …
Persistent link: https://www.econbiz.de/10013038557