This paper derives a negative relationship between the dispersion of forecasts among investors and future stock returns based on Harrison and Kreps (1978). Using monthly data for earnings forecasts by market analysts, this paper presents empirically that the dispersion in forecasts has...

This paper demonstrates that the optimal willingness to pay for a stock is the payoff from holding the stock for one period when investors have different expectations, and that the willingness to pay can be represented as the sum of the expected present value of future dividends and the expected...

This paper examines whether the Sharpe ratios constructed from survey forecasts are favorable to the rational approach or the irrational approach in explaining the equity premium puzzle. T-tests, bias tests, and structural break tests for the bias are conducted for the examination. The results...

This paper extends the Harrison-Kreps model by allowing limited short sales. The main results of this paper are: (1) investors pursue short-term gains when perceiving heterogeneous expectations; (2) important properties of the equilibrium price in the Harrison-Kreps model still hold even when...

This paper presents strong statistical evidence that the dividend- price ratio in the US has experienced a change in persistence from I(0) to I(1), while stock returns have not. This provides an econometric explanation why the predictive power of the dividend-price ratio in the US has changed...