I develop a stochastic growth model with production where there is a hidden state governing productivity growth regimes, and the hidden state evolves according to a Markov chain. Economic agents learn about the hidden state and display ambiguity aversion in the spirit of Klibanoff et al. (2005)....

I study the effects of risk and ambiguity (Knightian uncertainty) on optimal portfolios and equilibrium asset prices when investors receive information that is difficult to link to fundamentals. I show that the desire of investors to hedge ambiguity leads to portfolio inertia and excess...

In 1995, Benartzi and Thaler introduced the concept myopic loss aversion to explain the equity premium puzzle. They provided empirical evidence to support their arguments. Recently, Durand, et al. criticized this empirical analysis. They propose an approach which not only rejects the...

We use the Bayesian method introduced by Gallant and McCulloch (2009) to estimate consumption-based asset pricing models featuring smooth ambiguity preferences. We rely on semi-nonparametric estimation of a flexible auxiliary model in our structural estimation. Based on the market and aggregate...

Purpose - The current study aims to investigate the impacts of two behavioral biases, namely, loss aversion and overconfidence on the performance of US companies. First, the impact of loss aversion on the economic performance of companies was assessed. Second, the impact of overconfidence on...

We study optimal execution with "self-exciting" price impact, where persistent trades not only incur price impact but also increase the execution costs for successive orders. This model is motivated by an equilibrium between fundamental sellers, market makers, and end users. For risk-neutral...

This paper considers a sequence of discrete-time random walk markets with a single risky asset, and gives conditions for the existence of arbitrage opportunities or free lunches with vanishing risk, of the form of waiting to buy and selling the next period, with no shorting, and furthermore for...

This paper considers a sequence of discrete-time random walk markets with a single risky asset, and gives conditions for the existence of arbitrage opportunities or free lunches with vanishing risk, of the form of waiting to buy and selling the next period, with no shorting, and furthermore for...

We propose Keynesian utilities as a new class of non-expected utility functions representing the preferences of investors for optimism, defined as the composition of the investor's preferences for risk and her preferences for ambiguity. The optimism or pessimism of Keynesian utilities is...