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Disagreement, correlation and asset prices

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  • He, Xue-Zhong
  • Shi, Lei

Abstract

When people agree to disagree, how does the disagreement affect asset prices? Within an equilibrium framework with two agents, two risky assets and a riskless bond, we analyze the joint impact of disagreement about expected payoff, variance and correlation, and compare prices with benchmark prices in a market with homogeneous beliefs.

Suggested Citation

  • He, Xue-Zhong & Shi, Lei, 2012. "Disagreement, correlation and asset prices," Economics Letters, Elsevier, vol. 116(3), pages 512-515.
    • Handle: RePEc:eee:ecolet:v:116:y:2012:i:3:p:512-515
    DOI: 10.1016/j.econlet.2012.04.064
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    References listed on IDEAS

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    2. Henry L. Friedman & Mirko S. Heinle, 2016. "Taste, information, and asset prices: implications for the valuation of CSR," Review of Accounting Studies, Springer, vol. 21(3), pages 740-767, September.

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    More about this item

    Keywords

    Equilibrium asset prices; Disagreement; Consensus belief; Mispricing; Spillover effect;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

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