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We study equilibrium firm-level stock returns in two economies: one in which investors are loss averse over the fluctuations of their stock portfolio and another in which they are loss averse over the fluctuations of individual stocks that they own. Both approaches can shed light on empirical...
Persistent link: https://www.econbiz.de/10012470536
We study equilibrium firm-level stock returns in two economies: one in which investors are loss averse over the fluctuations of their stock portfolio and another in which they are loss averse over the fluctuations of individual stocks that they own. Both approaches can shed light on empirical...
Persistent link: https://www.econbiz.de/10012763180
Behavioral finance argues that some financial phenomena can plausibly be understood using models in which some agents are not fully rational. The field has two building blocks: limits to arbitrage, which argues that it can be difficult for rational traders to undo the dislocations caused by less...
Persistent link: https://www.econbiz.de/10012469487
Behavioral finance argues that some financial phenomena can plausibly be understood using models in which some agents are not fully rational. The field has two building blocks: limits to arbitrage, which argues that it can be difficult for rational traders to undo the dislocations caused by less...
Persistent link: https://www.econbiz.de/10012762978
Behavioral finance argues that some financial phenomena can plausibly be understood using models in which some agents are not fully rational. The field has two building blocks: limits to arbitrage , which argues that it can be difficult for rational traders to undo the dislocations caused by...
Persistent link: https://www.econbiz.de/10014023853
Persistent link: https://www.econbiz.de/10001832926
Persistent link: https://www.econbiz.de/10001700615
Persistent link: https://www.econbiz.de/10011925896
We present an extrapolative model of bubbles. In the model, many investors form their demand for a risky asset by weighing two signals--an average of the asset's past price changes and the asset's degree of overvaluation. The two signals are in conflict, and investors "waver" over time in the...
Persistent link: https://www.econbiz.de/10012456729
Survey evidence suggests that many investors form beliefs about future stock market returns by extrapolating past returns: they expect the stock market to perform well (poorly) in the near future if it performed well (poorly) in the recent past. Such beliefs are hard to reconcile with existing...
Persistent link: https://www.econbiz.de/10012459474