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." …

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 …

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 …

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 …