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Equilibrium Asset Pricing Under Heterogeneous Information
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Book Synopsis Equilibrium Asset Pricing Under Heterogeneous Information by : Bruno Biais
Download or read book Equilibrium Asset Pricing Under Heterogeneous Information written by Bruno Biais and published by . This book was released on 2004 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze theoretically and empirically the implications of heterogeneous information for equilibrium asset pricing and portfolio choice. Our theoretical framework, directly inspired by Admati (1985), implies that with partial information aggregation, portfolio separation fails, buy-and-hold strategies are not optimal, and investors should structure their portfolios using the information contained in prices in order to cope with winner's curse problems. We implement empirically such a price-contingent portfolio allocation strategy and show that it outperforms economically and statistically the passive/indexing buy-and-hold strategy. We thus demonstrate that prices reveal information, in contrast with the homogeneous information CAPM, but only partially, consistent with a Noisy Rational Expectations Equilibrium. The success of our pricecontingent strategy does not proxy for the success of trading strategies based purely on historical performance, such as momentum investment.
Book Synopsis A Model of Dynamic Equilibrium Asset Pricing with Heterogeneous Beliefs and Extraneous Risk by : Süleyman Başak
Download or read book A Model of Dynamic Equilibrium Asset Pricing with Heterogeneous Beliefs and Extraneous Risk written by Süleyman Başak and published by . This book was released on 2000 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Asset Pricing in a Production Economy with Heterogeneous Investors by : Jin E. Zhang
Download or read book Asset Pricing in a Production Economy with Heterogeneous Investors written by Jin E. Zhang and published by . This book was released on 2006 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper is a theoretical examination of the stochastic behavior of equilibrium asset prices in an economy consisting of a production process controlled by a state variable representing the state of technology. The investors with different degrees of risk aversion and time preferences trade and lend among themselves in order to maximize their individual utilities of life time consumption. The allocation of wealth fluctuates randomly among them and acts as a state variable against which each investor wants to hedge. This hedging motive complicates the investor's portfolio choice and the equilibrium in the production economy. A general method of constructing equilibrium asset prices is developed and the wealth effect in the general equilibrium is discussed.The equilibrium market prices of risks and risk-free rate in a production economy with one representative investor has been presented by Cox, Ingersoll and Ross (1985). Considerable progress has been made by Dumas (1989) and Vasicek (2005) on the case of heterogeneous investors, however a complete description of the general equilibrium in the production economy with heterogeneous investors is yet to be developed. That is the focus of this paper.This paper establishes an economic model for the equilibrium asset prices by solving the joint optimization problem with proper market clearing conditions. The equilibrium conditions of the two party dynamic game are written as a set of two highly entangled nonlinear partial differential equations. The result can be extended to handle the case of multiple heterogeneous investors.
Book Synopsis Equilibrium Asset Pricing Under Incomplete Information on Regimes by : David Christen
Download or read book Equilibrium Asset Pricing Under Incomplete Information on Regimes written by David Christen and published by . This book was released on 2015 with total page 760 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Equilibrium Asset Pricing with Heterogeneous Agents and Interdependent Habit Formation by : David R. Alexander
Download or read book Equilibrium Asset Pricing with Heterogeneous Agents and Interdependent Habit Formation written by David R. Alexander and published by . This book was released on 2004 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Essays on Equilibrium Asset Pricing with Heterogeneous Agents by : Qi Zeng
Download or read book Essays on Equilibrium Asset Pricing with Heterogeneous Agents written by Qi Zeng and published by . This book was released on 2003 with total page 117 pages. Available in PDF, EPUB and Kindle. Book excerpt: My dissertation concerns the equilibrium asset pricing and its implications when agents are heterogenous. There are three chapters in the dissertation.
Book Synopsis Incomplete Information, Heterogeneity, and Asset Pricing by : Tony Berrada
Download or read book Incomplete Information, Heterogeneity, and Asset Pricing written by Tony Berrada and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider a pure exchange economy where the drift of aggregate consumption is unobservable. Agents with heterogeneous beliefs and preferences act competitively on financial and goods markets. We discuss how equilibrium market prices of risk differ across agents, and in particular we discuss the properties of the market price of risk under the physical (objective) probability measure. We propose a number of specifications of risk aversions and beliefs where the market price of risk is much higher, and the riskless rate of return lower, than in the equivalent full information economy (homogeneous and heterogeneous preferences) and thus can provide an(other) answer to the equity premium and risk-free rate puzzles. We also derive a representation of the equilibrium volatility and numerically assess the role of heterogeneity in beliefs. We show that a high level of stock volatility can be obtained with a low level of aggregate consumption volatility when beliefs are heterogeneous. Finally, we discuss how incomplete information may explain the apparent predictability in stock returns and show that in-sample predictability cannot be exploited by the agents, as it is in fact a result of their learning processes.
Book Synopsis A Theory of Asset Pricing Based on Heterogeneous Information by : Elias Albagli
Download or read book A Theory of Asset Pricing Based on Heterogeneous Information written by Elias Albagli and published by . This book was released on 2011 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose a theory of asset prices that emphasizes heterogeneous information as the main element determining prices of different securities. Our main analytical innovation is in formulating a model of noisy information aggregation through asset prices, which is parsimonious and tractable, yet flexible in the specification of cash flow risks. We show that the noisy aggregation of heterogeneous investor beliefs drives a systematic wedge between the impact of fundamentals on an asset price, and the corresponding impact on cash flow expectations. The key intuition behind the wedge is that the identity of the marginal trader has to shift for different realization of the underlying shocks to satisfy the market-clearing condition. This identity shift amplifies the impact of price on the marginal trader's expectations. We derive tight characterization for both the conditional and the unconditional expected wedges. Our first main theorem shows how the sign of the expected wedge (that is, the difference between the expected price and the dividends) depends on the shape of the dividend payoff function and on the degree of informational frictions. Our second main theorem provides conditions under which the variability of prices exceeds the variability for realized dividends. We conclude with two applications of our theory. First, we highlight how heterogeneous information can lead to systematic departures from the Modigliani-Miller theorem. Second, in a dynamic extension of our model we provide conditions under which bubbles arise -- National Bureau of Economic Research web site.
Book Synopsis Equilibrium Asset Pricing and Portfolio Choice Under Asymmetric Information by :
Download or read book Equilibrium Asset Pricing and Portfolio Choice Under Asymmetric Information written by and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Equilibrium Asset Prices and Savings of Heterogeneous Agents in the Presence of Incomplete Markets and Portfolio Constraints by : Albert Marcet
Download or read book Equilibrium Asset Prices and Savings of Heterogeneous Agents in the Presence of Incomplete Markets and Portfolio Constraints written by Albert Marcet and published by . This book was released on 1998 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Equilibrium Asset Pricing and Portfolio Choice with Heterogeneous Preferences by : Jaksa Cvitanic
Download or read book Equilibrium Asset Pricing and Portfolio Choice with Heterogeneous Preferences written by Jaksa Cvitanic and published by . This book was released on 2014 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the market price of risk, the stock volatility and the hedging behavior in equilibrium of heterogeneous agents with arbitrary utility functions, consuming only at the end of the time horizon, and with the state variable following an arbitrary homogeneous diffusion process. We introduce a new notion that we call the "rate of macroeconomic fluctuations", and show hat, in equilibrium, all the quantities and strategies can be characterized in terms of the dividend volatility and the interest rate volatility discounted at this rate. We also show that both the optimal portfolio strategies and the stock price volatility can be decomposed into a myopic and a non-myopic component. The market price of risk, the myopic volatility and the myopic portfolio are determined by the present market value of future discounted volatilities of the dividend and of the interest rate. By contrast, the non-myopic volatility and non-myopic portfolio are given in terms of covariances of equilibrium quantities with the discounted dividend volatility. These representations enable us to show that, under natural cyclicality conditions, the non-myopic volatility is always positive, and the non-myopic portfolio is positive for an agent if and only if the product of his prudence and risk tolerance is less than the same product corresponding to the log agent.
Book Synopsis Incomplete Information and Heterogeneous Beliefs in Continuous-time Finance by : Alexandre C. Ziegler
Download or read book Incomplete Information and Heterogeneous Beliefs in Continuous-time Finance written by Alexandre C. Ziegler and published by Springer Science & Business Media. This book was released on 2012-11-02 with total page 205 pages. Available in PDF, EPUB and Kindle. Book excerpt: After a brief review of the existing incomplete information literature, the effect of incomplete information on investors' exptected utility, risky asset prices, and interest rates is described. It is demonstrated that increasing the quality of investors' information need not increase their expected utility and the prices of risky assets. The impact of other factors is discussed in detail. It is also demonstrated that financial markets in general do not aggregate information efficiently, a fact that can explain the equity premium puzzle.
Book Synopsis Asset Pricing with Heterogeneous and Constrained Investors by : Lei Shi
Download or read book Asset Pricing with Heterogeneous and Constrained Investors written by Lei Shi and published by . This book was released on 2019 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the joint effect of borrowing and short-sale constraints in a dynamic economy populated by two constrained investors with heterogeneous risk aversions and beliefs. We find that equilibrium prices adjust in such a way that the constraints never simultaneously bind. When the constraints are tight, we observe a regime switch behavior (discontinuities) in the risk-free rate and market price of risk at a critical state, where two equilibria exist, i.e., either constraint can be binding. Stock return volatility is the lowest at the critical state. Imposing a ban on short-sales at the same time when access to credit is restrictive or tightening borrowing during a short-sale ban can potentially move the equilibrium away from the critical state, thus increase stock return volatility rather than reducing it.
Book Synopsis Heterogeneous Beliefs, Asset Market Equilibrium and the Arbitrage Pricing Model by : Puneet Handa
Download or read book Heterogeneous Beliefs, Asset Market Equilibrium and the Arbitrage Pricing Model written by Puneet Handa and published by . This book was released on 1986 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis A time homogeneous stationary equilibrium model of asset pricing with heterogeneous agents by : George Vachadze
Download or read book A time homogeneous stationary equilibrium model of asset pricing with heterogeneous agents written by George Vachadze and published by . This book was released on 1999 with total page 19 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Asset Pricing and Portfolio Choice Theory by : Kerry Back
Download or read book Asset Pricing and Portfolio Choice Theory written by Kerry Back and published by Oxford University Press. This book was released on 2010-09-10 with total page 504 pages. Available in PDF, EPUB and Kindle. Book excerpt: In Asset Pricing and Portfolio Choice Theory, Kerry E. Back at last offers what is at once a welcoming introduction to and a comprehensive overview of asset pricing. Useful as a textbook for graduate students in finance, with extensive exercises and a solutions manual available for professors, the book will also serve as an essential reference for scholars and professionals, as it includes detailed proofs and calculations as section appendices. Topics covered include the classical results on single-period, discrete-time, and continuous-time models, as well as various proposed explanations for the equity premium and risk-free rate puzzles and chapters on heterogeneous beliefs, asymmetric information, non-expected utility preferences, and production models. The book includes numerous exercises designed to provide practice with the concepts and to introduce additional results. Each chapter concludes with a notes and references section that supplies pathways to additional developments in the field.
Book Synopsis Consumption-Based Asset Pricing by : John Y. Campbell
Download or read book Consumption-Based Asset Pricing written by John Y. Campbell and published by . This book was released on 2002 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
