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Uncertainty, sentiments and time-varying risk premia

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  • Berardi, Michele

Abstract

Why are stock prices much more volatile than the underlying dividends an asset entitles to? The excess volatility of prices can in principle be attributed to two different causes: time-varying discount rates for expected future dividends, arising from variation in risk premia; or the irrational exuberance of investors, bidding prices up and down even in the absence of changes in the underlying value of the asset. No consensus has so far emerged among economists as to the prevalence of one or the other source of price variation.

Suggested Citation

  • Berardi, Michele, 2026. "Uncertainty, sentiments and time-varying risk premia," The North American Journal of Economics and Finance, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:ecofin:v:84:y:2026:i:c:s1062940826000574
    DOI: 10.1016/j.najef.2026.102635
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    Keywords

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    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

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