In this paper, we examine an exchange economy with a financial market composed of three assets: a share of a stock, an European call option written on the stock, and a riskless bond. The financial market is assumed to be incomplete and the option is not a redundant asset. In such a case the...

Wavelet based multi-scale analysis of financial time series has attracted much attention, lately, from both the academia and practitioners from all around the world. The unceasing metamorphosis of the discipline of finance from its humble beginning as applied economics to the more sophisticated...

Since the early 2000s, the importance of financial literacy for safe financial behaviors has increased in public debate and has been the motivation for several national and international institutions to launch and promote financial education initiatives. Although discussion on the effects of...

The VAR approach for testing present value models is applied to a nonlinear asset pricing model with three types of agents, using historical US stock prices and dividends. Besides rational long-term investors, that value assets according to expected dividends, the model includes rational and...

This paper investigates the welfare cost of business cycles in an economy where households have heterogeneous trading technologies. In an economy with aggregate risk, the different portfolio choices induced by heterogeneous trading technologies lead to a larger consumption inequality in...

Since the early 2000s, the importance of financial literacy for safe financial behaviors has increased in public debate and has been the motivation for several national and international institutions to launch and promote financial education initiatives. Although discussion on the effects of...

This paper studies the effects of multiple investment horizons and investors' bounded rationality on the price dynamics. We consider a market with one risky asset with agents maximizing expected utility of wealth over discrete investment periods. Investors' demand for the risky asset may depend...

We study the dynamics of a Lucas-tree model with finitely lived agents who “learn from experience.” Individuals update expectations by Bayesian learning based on observations from their own lifetimes. In this model, the stock price exhibits stochastic boom-and-bust fluctuations around the...

We perform a detailed asymptotic analysis of the equilibrium behavior of the asset prices, wealth size and portfolio weights in complete markets equilibria, with long-lived funds. In equilibrium, the fund with the (closest to) log preference will dominate the other funds in size, in the...