This study tests whether investor belief differences affect the cross-sectional variation of risk-neutral skewness, using data on firm-level stock options traded on the CBOE from 2003 to 2006. Using well known proxies for heterogeneous beliefs, we find that stocks with greater belief differences...

Recent studies suggest that the type of strategic environment or expectation feedback may have a large impact on whether the market learns the rational fundamental price. We present an experiment where the fundamental price experiences large unexpected shocks. Markets with negative expectation...

Many studies investigate the impact of heterogeneous beliefs in the first moment, while very few in the second moment. This is partially due to continuous-time setup which makes it difficult to incorporate heterogeneous beliefs in the second moment. In a two-period exponential-normal model with...