Showing 1 - 10 of 25
We provide a price characterization of efficient contingent claims - that is, chosen by at least a rational agent - in multiperiod economies with market frictions. Frictions include market incompleteness, transaction costs, short-selling, and borrowing costs. We characterize the inefficiency...
Persistent link: https://www.econbiz.de/10008520013
Our aim is to analyze the link between optimism and risk aversion in a subjective expected utility setting and to estimate the average level of optimism when weighted by risk tolerance. Its estimation leads to a non-trivial statistical problem. We start from a large lottery survey (1536...
Persistent link: https://www.econbiz.de/10008520050
Persistent link: https://www.econbiz.de/10008500178
S. Kusuoka [K 01, Theorem 4] gave an interesting dual characterizationof law invariant coherent risk measures, satisfying the Fatou property.The latter property was introduced by F. Delbaen [D 02]. In thepresent note we extend Kusuoka's characterization in two directions, thefirst one being...
Persistent link: https://www.econbiz.de/10008529644
Can investors with irrational beliefs be neglected as long as they are rational on average ? Does unbiased disagreement lead to trades that cancel out with no consequences on prices, as implicitly assumed by the traditional models ? We show in this paper that there is an important impact of...
Persistent link: https://www.econbiz.de/10008529672
The aim of this paper is to determine whether individuals exhibit a behavioral bias towards pessimism in their beliefs, in a lottery or more generally in an investment opportunities framework. For this purpose, we design a field survey on a sample of 1,540 individuals aiming at deriving a...
Persistent link: https://www.econbiz.de/10008532337
This paper is a generalization of [Calvet, L., Grandmont, J.-M., Lemaire, I., 2002. Aggregation of heterogenous beliefs and asset pricing in complete financial markets. Working paper] to a dynamic setting. We propose a method to aggregate heterogeneous individual probability beliefs, in dynamic...
Persistent link: https://www.econbiz.de/10008532399
Under a comonotonicity assumption between aggregate dividends and the market portfolio, the CCAPM formula becomes more tractable and more easily testable. In this paper, we provide theoretical justifications for such an assumption.
Persistent link: https://www.econbiz.de/10008532425
In this paper, we characterize subjective probability beliefs leading to a higher equilibrium market price of risk. We establish that Abel's result on the impact of doubt on the risk premium is not correct in general; see Abel [2002. An exploration of the effects of pessimism and doubt on asset...
Persistent link: https://www.econbiz.de/10008532509
We analyze the link between pessimism and risk-aversion. We consider a model of partially revealing, competitive rational expectations equilibrium with diverse information, in which the distribution of risk-aversion across individuals is unknown. We show that when a high individual level of...
Persistent link: https://www.econbiz.de/10008532568