Empirical evidence is presented to show that the dispersion in analysts' forecasts can explain part of the differences in cross-sectional stock returns. Generally, high dispersion stocks show relatively lower future returns than low dispersion stocks, and the difference in performance is...

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...

Many studies have pointed out that the underlying relations and functions for the monetary model (e.g. the PPP relation, the money demand function, monetary policy rule, etc.) have undergone parameter instabilities and that the relation between exchange rates and macro fundamentals are unstable...

The conventional dividend-price ratio is highly persistent, and the literature reports mixed evidence on its role in predicting stock returns. In particular, its predictive power seems to be sensitive to the choice of the sample period. We argue that the decreasing number of firms with...

Regarding the recent switch from the fixed base price index to the chained-type price index in many countries, we examine important issues including the selection of the weight to produce more accurate chained-type price indices and to maintain statistical consistency in the time series of a...