Asset pricing under information-processing constraints

This paper studies the implications of rational inattention (RI) for asset pricing in a LQ-PIH model. We find that RI increases the size of risk adjustment to asset prices and expected excess returns, which helps resolve extant asset pricing puzzles.

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Year of publication:	2010
Authors:	Luo, Yulei ; Young, Eric R.
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 107.2010, 1, p. 26-29
Publisher:	Elsevier
Keywords:	Rational inattention Asset pricing Permanent income

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Type of publication:	Article
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10008551327