In this paper we analyze an economy with two heterogeneous investors who both exhibit misspecified filtering models for the unobservable expected growth rate of the aggregated dividend. A key result of our analysis with respect to long-run investor survival is that there are degrees of model...

We perform a general equilibrium analysis in a complete markets economy whenthe dividend follows a jump-diffusion process with stochastic volatility. Agents haveCRRA utility, but differ with respect to their degree of risk aversion. The keyoutput of our analysis is the structure of the...

We consider an exchange economy with two heterogeneous stocks and twogroups of investors. Dividends follow diusion processes, with a constant expectedgrowth rate for one stock and a stochastic drift for the other. 'Rationalinvestors' can either observe this stochastic drift without error or...

In this paper we perform a general equilibrium analysis when the dividend followsa jump-diffusion process with stochastic volatility, where both the dividend itselfand its volatility can jump. We work in a complete markets economy and assumethat agents have CRRA utility, but can differ with...

In this paper we study the equilibrium in a heterogeneous economy with twogroups of investors. Over-confident experts incorrectly assume that their signalfor the drift of the dividend process is correlated with the true drift, butinterpret the signal otherwise perfectly. Rational laymen avoid...

Model mis-specification can cause substantial utility losses in portfolio planning.In this paper, we compare two approaches to cope with this problem,robust control and learning. We derive the optimal portfolio strategies and theutility losses due to model mis-specification. Surprisingly,...

In this paper we analyze an economy with two heterogeneous investors who both exhibit misspecified filtering models for the unobservable expected growth rate of the aggregated dividend. A key result of our analysis with respect to long-run investor survival is that there are degrees of model...

In this paper we study the equilibrium in a heterogeneous economy with two groups of investors. Over-confident experts incorrectly assume that their signal for the drift of the dividend process is correlated with the true drift, but interpret the signal otherwise perfectly. Rational laymen avoid...

The paper analyzes the robustness of stable volatility strategies, i.e. strategies in which the portfolio weight of the stock is inversely proportional to its local volatility. These strategies are optimal for a CRRA investor if the stock follows a diffusion process, the expected excess return...

Model mis-specification can cause substantial utility losses in portfolio planning. In this paper, we compare two approaches to cope with this problem, robust control and learning. We derive the optimal portfolio strategies and the utility losses due to model mis-specification. Surprisingly,...