Why Disagreement May Not Matter (much) for Asset Prices
AbstractA simple consumption-based two-period model is used to study the (theoretical) effects of disagreement on asset prices. Analytical and numerical results show that individual uncertainty has a much larger effect on risk premia than disagreement if (i) the risk aversion is reasonably high and (ii) individual uncertainty is not much smaller than disagreement. Evidence from survey data on beliefs about output growth suggests that the latter is more than satisfied.
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Bibliographic InfoPaper provided by Department of Economics, University of St. Gallen in its series University of St. Gallen Department of Economics working paper series 2008 with number 2008-11.
Length: 19 pages
Date of creation: May 2008
Date of revision:
riskfree rate; implied volatility; Survey of Professional Forecasters;
Other versions of this item:
- Söderlind, Paul, 2009. "Why disagreement may not matter (much) for asset prices," Finance Research Letters, Elsevier, vol. 6(2), pages 73-82, June.
- C42 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Survey Methods
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-06-13 (All new papers)
- NEP-DGE-2008-06-13 (Dynamic General Equilibrium)
- NEP-MAC-2008-06-13 (Macroeconomics)
- NEP-UPT-2008-06-13 (Utility Models & Prospect Theory)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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