Intuition and leading equilibrium models are at odds with the empirical evidence that expected returns are barely related to volatility at the market level. This paper proposes a closed-form general equilibrium model, which connects the investors' expectations of fundamentals with those of...

Intuition and leading equilibrium models are at odds with the empirical evidence that expected returns are barely related to volatility at the market level. This paper proposes a closed-form general equilibrium model, which connects the investors' expectations of fundamentals with those of...

The literature posits that some CEO overconfidence benefits shareholders, though high levels may not. We argue adequate controls and independent viewpoints provided by an independent board mitigates the costs of CEO overconfidence. We use the concurrent passage of the Sarbanes-Oxley Act and...

In infinite horizon economies only local equivalence of beliefs is needed to ensure the existence of an Arrow-Debreu equilibrium. In fact, agents can even disagree completely in the long run in the sense that asymptotically, their beliefs are singular. -- Heterogeneous expectations ;...