, return volatility, and trading volume in the mortgage-backed security market. We find that increased disagreement is … associated with higher expected returns, higher return volatility, and larger trading volume. These results imply that there is a … positive risk premium for disagreement in asset prices. We also show that volatility in and of itself does not lead to higher …

a GARCH process for conditional volatility. Under such heteroskedasticity, OLS estimators or parameters in single …

We study the impact of model disagreement on the dynamics of asset prices, return volatility, and trade in the market … disagree about the length of the business cycle. We show that model disagreement amplifies return volatility and trading volume …, we find that while the absolute level of return volatility is driven by long-run risk, the variation and persistence of …

findings have implications for market-wide volatility - the model-implied correlations alone can explain 44% of the cross …-section of aggregate volatility. The results are robust to controlling for a number of alternative factors put forth by the …

We provide evidence that agents have slow-moving beliefs about stock market volatility that lead to initial … underreaction to volatility shocks followed by delayed overreaction. These dynamics are mirrored in the VIX and variance risk … premiums which reflect investor expectations about volatility and are also supported in surveys and in firm-level option prices …

explored that evidence of excess volatility need not imply the existence of unexploited profit opportunities under the rational …

This paper develops a theory of expectations-driven business cycles based on learning. Agents have incomplete knowledge … consumption and leisure. Output volatility is comparable with a rational expectations analysis with a standard deviation of … technology shock that is 20 percent smaller, and has substantially more volatility in investment and hours. Persistence in these …

volatility. This paper develops a simple model that can exhibit self-fulfilling fluctuations in the expected path for … unemployment. The novel feature is that the scope for sunspot-driven volatility depends on the level of household wealth. When …

-decreasing volatility in output and employment. We refer to the latter type of equilibria as expectation traps. In effect, our paper …