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Beliefs Aggregation and Return Predictability
Kyle, Albert S. - 2020
We study return predictability using a model of speculative trading among relatively overconfident competitive traders who agree to disagree about the precision of their private information. Although traders apply Bayes Law consistently, returns are predictable. In addition to trading on...
Persistent link: https://www.econbiz.de/10012856118
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Momentum and reversal in financial markets with persistent heterogeneity
Bottazzi, Giulio; Dindo, Pietro; Giachini, Daniele - 2018
This paper investigates whether short-term momentum and long-term reversal may emerge from the wealth reallocation process taking place in speculative markets. We assume that there are two classes of investors who trade long-lived assets by holding constantly rebalanced portfolios based on their...
Persistent link: https://www.econbiz.de/10011790528
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The impact of heterogeneous signals on stock price predictability in a strategic trade model
Winter, Christoph - 2018
Generalizing the idea that price momentum can be explained by different levels of uncertainty inherent in the information structure, we implement signal-specific differences in uncertainty in a Kyle type model of strategic trading. We derive the equilibrium in a single-auction setting as well as...
Persistent link: https://www.econbiz.de/10011952637
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The impact of heterogeneous signals on stock price predictability in a rational expectations model
Winter, Christoph - 2018
Through extending a standard Grossman and Stiglitz (1980) noisy rational expectations economy by a heterogeneous signal structure with signal-specific differences in uncertainty, we show that price momentum as well as reversal are not intrinsically at odds with rational behavior. Differences in...
Persistent link: https://www.econbiz.de/10012140900
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Informed Trading and Stock Market Efficiency
Mäkinen, Taneli - 2015
The information content of stock prices is analysed without imposing strong restrictions on traders' preferences and the distribution of dividends. Noise in the information contained in equilibrium prices arises from endogenous asset supply, which offsets price movements due to informed trading....
Persistent link: https://www.econbiz.de/10013027362
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Inside information and public news : R-squared and beyond
Brown, William O. - 1999
This paper finds that the majority of stock price movements remain unexplained after controlling for both public and private information. This suggests that economists' inability to explain asset price movements is the result of either noise or naive asset pricing models.
Persistent link: https://www.econbiz.de/10011566279
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Rational belief bubbles
Sohn, Hyun-U; Sornette, Didier - 2020
We propose an extension of the class of rational expectations bubbles (REBs) to the more general rational beliefs setting of Kurz (1994a,b). In a potentially non-stationary but stationarizable environment, among an heterogenous population of agents, it is possible to hold more than one...
Persistent link: https://www.econbiz.de/10012181099
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Rationality and asset prices under belief heterogeneity
Giachini, Daniele - 2018
In this paper I study the relationship between rationality and asset prices when agents have heterogeneous and incorrect beliefs about future events. Using the fully rational pricing as a benchmark, I show that when agents behave according to the Subjective Generalized Kelly rule (Bottazzi et...
Persistent link: https://www.econbiz.de/10011805975
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How does the diversity of investors' beliefs affect stock price informativeness?
Wei, Xu - In: Applied economics 49 (2017) 6, pp. 515-520
Persistent link: https://www.econbiz.de/10011810704
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The Investment CAPM
Zhang, Lu - 2018
A new class of Capital Asset Pricing Models (CAPM) arises from the first principle of real investment for individual … firms. Conceptually as ‘causal' as the consumption CAPM, yet empirically more tractable, the investment CAPM emerges as a … drives many empirical patterns that are anomalous in the consumption CAPM. Most important, integrating the anomalies …
Persistent link: https://www.econbiz.de/10012930661