Can investors with irrational beliefs be neglected as long as they are rational on average? Do their trades cancel out with no consequences on prices, as implicitly assumed by traditional models? We consider a model with irrational investors, who are rational on average. We obtain waves of...

Under a comonotonicity assumption between aggregate dividends and the market portfolio, the CCAPM formula becomes more tractable and more easily testable. In this paper, we provide theoretical justifications for such an assumption.