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Do Heterogeneous Beliefs Matter for Asset Pricing?

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  • Jennifer Juergens
  • Evan Anderson
  • Eric Ghysels

Abstract

We study how heterogeneous beliefs affect returns and examine whether heterogeneous beliefs are a priced factor in traditional asset pricing models. To accomplish this task, we suggest new empirical measures based on the disagreement among analysts about expected (short-term and long-term) earnings are good proxies. Having established that heterogeneity of beliefs matters for asset pricing we turn our attention to estimating a structural model in which we use the forecasts of financial analysts to proxy for the beliefs of agents. Finally, we investigate if the amount of heterogeneity in analysts' forecasts can help explain asset pricing puzzles

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Bibliographic Info

Paper provided by Econometric Society in its series Econometric Society 2004 North American Summer Meetings with number 477.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:nasm04:477

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Keywords: Heterogeneous Beliefs; Asset pricing;

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Cited by:
  1. Asani Sarkar & Robert A. Schwartz, 2006. "Two-sided markets and intertemporal trade clustering: insights into trading motives," Staff Reports 246, Federal Reserve Bank of New York.
  2. Fousseni Chabi-Yo & Eric Ghysels & Eric Renault, 2008. "On Portfolio Separation Theorems with Heterogeneous Beliefs and Attitudes towards Risk," Working Papers 08-16, Bank of Canada.

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