This paper introduces a tractable, structural model of subjective beliefs. Since agents that plan for the future care … overestimate the return of their investment and under diversify. In general equilibrium, agents’ prior beliefs are endogenously … heterogeneous, leading to gambling. Second, in a consumption-saving problem with stochastic income, agents are both overconfident …

This paper introduces a tractable, structural model of subjective beliefs. Since agents that plan for the future care … overestimate the return of their investment and under diversify. In general equilibrium, agents’ prior beliefs are endogenously … heterogeneous, leading to gambling. Second, in a consumption-saving problem with stochastic income, agents are both overconfident …

unit-record data on home sale prices. We find that homeowners' price beliefs are unbiased at the postcode level, on average …, although there is considerable dispersion in the difference between beliefs and prices across postcodes. Household … characteristics, such as age and tenure, and the regional unemployment rate are correlated with differences between beliefs and prices …

This paper introduces a tractable, structural model of subjective beliefs. Since agents that plan for the future care … overestimate the return of their investment and underdiversify. In general equilibrium, agents' prior beliefs are endogenously … heterogeneous, leading to gambling. Second, in a consumption-saving problem with stochastic income, agents are both overconfident …

This Paper introduces a tractable, structural model of subjective beliefs. Forward-looking agents care about expected … balance these forces by maximizing average felicity. A small bias in beliefs typically leads to first-order gains due to …, agents’ prior beliefs are endogenously heterogeneous. Finally, in a consumption-saving problem with stochastic income, agents …