We derive the equilibrium interest rate and risk premiums using recursive utility for jump-diffusions. Compared to to the continuous version, including jumps allows for a separate risk aversion related to jump size risk in addition to risk aversion related to the continuous part. The jump part...

Arguing that in the real world relatively optimistic inexperienced investors are prey for relatively pessimistic veteran traders, we formalize this intuitive conjecture as a proven proposition in a simple model. This agreement to disagree leads to a perpetual bubble, in which more experienced,...

The thoughts and behaviors of financial market participants depend upon adopted cultural traits, including information signals, beliefs, strategies, and folk economic models. Financial traits compete to survive in the human population, and are modified in the process of being transmitted from...

The 4 th European Retail Investment Conference was hosted at Boerse Stuttgart, Germany, from May 17 th to 19 th 2017. The conference chairs invited academics and practitioners to participate and discuss empirical and theoretical research that investigates retail investor products and services,...

We argue that perception, priming, and cognition research utilize the tools of stage magic in problematic ways, engaging in what we call "surprise-hacking." Surprise-hacking consists of the pre-experimental planning and staging of counterintuitive and negative results (such as blindness, bias,...

In this paper we contrast bounded and ecological rationality with a proposed alternative, generative rationality. Ecological approaches to rationality build on the idea of humans as “intuitive statisticians” while we argue for a more generative conception of humans as “probing...

The effect of incomplete information on the term structure of interest rates is examined in the framework of a pure exchange economy under uncertainty. When the growth rate of the aggregate endowment is known, the term structure is flat and deterministic. When agents do not observe the...

This paper analyzes growth and welfare effects of income taxation in a stochastic endogenous growth model with externalities in human-capital accumulation. The government participates in individual income risks by the collection of a flat-rate income tax that affects the mean and the variance of...

The present paper analyses an optimal consumption and investment problem of a retiree with a constant relative risk aversion (CRRA) who faces parameter uncertainty about the financial market.We solve the optimization problem under partial information by making the market observationally complete...