Introducing learning into a standard asset pricing model improves considerably its empirical performance. In a model of learning where today's stock price is determined by the expectation of tomorrow's stock price, the dynamics of expectations and actual price are such that the market has...

Introducing bounded rationality into a standard consumption based asset pricing model with a representative agent and time separable preferences strongly improves empirical performance. Learning causes momentum and mean reversion of returns and thereby excess volatility, persistence of...

We study a standard consumption based asset pricing model with rational investors who entertain subjective prior beliefs about price behavior. Optimal behavior then dictates that investors learn about price behavior from past price observations. We show that this imparts momentum and mean...

We study a standard consumption based asset pricing model with rational investors who entertain subjective prior beliefs about price behavior. Optimal behavior then dictates that investors learn about price behavior from past price observations. We show that this imparts momentum and mean...

Introducing bounded rationality into a standard consumption based asset pricing model with a representative agent and time separable preferences strongly improves empirical performance. Learning causes momentum and mean reversion of returns and thereby excess volatility, persistence of...

Introducing bounded rationality into a standard consumption based asset pricing model with a representative agent and time separable preferences strongly improves empirical performance. Learning causes momentum and mean reversion of returns and thereby excess volatility, persistence of...