The behavior of asset prices is analyzed in a general equilibrium model where agents not only have preferences over consumption but also (implicitly) over their beliefs. Agents endogenously choose to disregard information contained in a signal if it conflicts with their desired beliefs. In this...

This paper presents a simple theoretical model of the term structure and analyzes the relations among optimal portfolio decisions, the real term structure of asset returns, and the risks and price volatilities of assets with different terms to maturity when the investor preferences are...