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Parameter Learning in General Equilibrium : The Asset Pricing Implications
Collin-Dufresne, Pierre - 2013
Parameter learning strongly amplifies the impact of macro shocks on marginal utility when the representative agent has a preference for early resolution of uncertainty. This occurs as rational belief updating generates subjective long-run consumption risks. We consider general equilibrium models...
Persistent link: https://www.econbiz.de/10013071899
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Ambiguity Aversion and Household Portfolio Choice : Empirical Evidence
Dimmock, Stephen G. - 2013
We test the relation between ambiguity aversion and five household portfolio choice puzzles: non- participation, low allocations to equity, home-bias, own-company stock ownership, and portfolio under- diversification. In a representative U.S. household survey, we measure ambiguity aversion using...
Persistent link: https://www.econbiz.de/10013087877
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On the Scholes Liquidation Problem
Brown, David B. - 2010
How should an investor unwind a portfolio in the face of recurring and uncertain liquidity needs? We propose a model of portfolio liquidation in two periods to investigate this question, initially posed by Myron Scholes following the fall of Long Term Capital Management. We show that when the...
Persistent link: https://www.econbiz.de/10013150836
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Predictable Returns and Asset Allocation : Should a Skeptical Investor Time the Market?
Wachter, Jessica A. - 2007
Are excess returns predictable and if so, what does this mean for investors? Previous literature has tended toward two polar viewpoints: that predictability is useful only if the statistical evidence for it is incontrovertible, or that predictability should affect portfolio choice, even if the...
Persistent link: https://www.econbiz.de/10012776789
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A Retrieved-Context Theory of Financial Decisions
Wachter, Jessica A. - 2019
Studies of human memory indicate that features of an event evoke memories of prior associated contextual states, which in turn become associated with the current event's features. This mechanism allows the remote past to influence the present, even as agents gradually update their beliefs about...
Persistent link: https://www.econbiz.de/10012863697
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Target-Date Funds in 401(K) Retirement Plans
Mitchell, Olivia S.; Utkus, Stephen P. - 2021
Individual responsibility for portfolio construction is a central theme for defined contribution pensions, yet the rise of target-date funds is shifting investment decisions from workers back to employers. A complex choice architecture including automatic enrollment, reenrollment, and fund...
Persistent link: https://www.econbiz.de/10013311923
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Obfuscation, Learning, and the Evolution of Investor Sophistication
Carlin, Bruce I.; Manso, Gustavo - 2021
Investor sophistication has lagged behind the growing complexity of retail financial markets. To explore this, we develop a dynamic model to study the interaction between obfuscation and investor sophistication. Taking into account different learning mechanisms within the investor population, we...
Persistent link: https://www.econbiz.de/10013228646
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Uncertainty as Commitment
Nosal, Jaromir B. - 2013
Time-inconsistency of no-bailout policies can create incentives for banks to take excessive risks and generate endogenous crises when the government cannot commit. However, at the outbreak of financial problems, usually the government is uncertain about their nature, and hence it may delay...
Persistent link: https://www.econbiz.de/10013087435
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Disasters Risk and Business Cycles
Gourio, Francois - 2010
shocks to aggregate uncertainty, I introduce a small, time-varying risk of economic disaster in a standard real business … risk of disaster does not affect the path of macroeconomic aggregates - a "separation theorem" between macroeconomic … variation in risk premia over time, are observationally equivalent to preference shocks. An increase in the perceived …
Persistent link: https://www.econbiz.de/10013150731
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Uncertainty in Environmental Economics
Pindyck, Robert S. - 2007
In a world of certainty, the design of environmental policy is relatively straightforward, and boils down to maximizing the present value of the flow of social benefits minus costs. But the real world is one of considerable uncertainty -- over the physical and ecological impact of pollution,...
Persistent link: https://www.econbiz.de/10012778137