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Asset pricing with mean reversion: The case of ships

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  • Moutzouris, Ioannis C.
  • Nomikos, Nikos K.

Abstract

We develop a heterogeneous-beliefs asset pricing model with microeconomic foundations that reproduces asset prices, cash flows and trading activity in a real asset economy. In contrast to the majority of financial markets’ behavioural models, and in line with the nature of the shipping industry, in this model agents extrapolate fundamentals. Formal estimation of the model indicates that an economy where a small fraction of agents significantly extrapolates fundamentals can explain the positive relation between earnings, vessel prices, and trading activity.

Suggested Citation

  • Moutzouris, Ioannis C. & Nomikos, Nikos K., 2020. "Asset pricing with mean reversion: The case of ships," Journal of Banking & Finance, Elsevier, vol. 111(C).
    • Handle: RePEc:eee:jbfina:v:111:y:2020:i:c:s0378426619302821
    DOI: 10.1016/j.jbankfin.2019.105708
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    References listed on IDEAS

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    Cited by:

    1. Kilian, Lutz & Nomikos, Nikos K. & Zhou, Xiaoqing, 2020. "A quantitative model of the oil tanker market in the Arabian Gulf," CFS Working Paper Series 648, Center for Financial Studies (CFS).

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    More about this item

    Keywords

    Behavioural finance; Asset pricing; Biased beliefs; Cash flow Extrapolation; Heterogeneous-agents;
    All these keywords.

    JEL classification:

    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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