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Disagreement of Disagreement

Author

Listed:
  • Christian L. Goulding
  • Campbell R. Harvey
  • Hrvoje Kurtović

Abstract

We show that major investor disagreement proxies have near zero correlation – making disagreement pricing inferences challenging. We develop a frictionless model that generates overpricing from latent disagreement, jointly rationalizes major proxies, and generates new testable predictions. Equilibrium interrelationships motivate a new disagreement measure, DIS, which is more predictive of returns cross-sectionally than major proxies and more consistently predictive across macroeconomic regimes. We provide evidence that the friction-based channel of Miller (1977) and a frictionless mechanism coexist and are empirically separable. DIS also provides a micro-founded, disagreement-based account of the IVOL puzzle, absorbing IVOL's predictability while revealing its regime and friction dependence.

Suggested Citation

  • Christian L. Goulding & Campbell R. Harvey & Hrvoje Kurtović, 2026. "Disagreement of Disagreement," NBER Working Papers 35049, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:35049
    Note: AP
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    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • 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
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General

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