I study the general equilibrium of a pure-exchange economy with several agents who receive uninsurable income, trade a dividend-paying stock, and borrow from and lend to each other. Agents are heterogeneous in risk-aversion and time-preference, and hold differing beliefs on the growth rates of...

In four well-powered experiments (N=1,195), I study an application of the affect heuristic to the evaluation of financial assets. The affect heuristic predicts that people derive expectations of return and risk from a global affective impression of an asset, which leads to negative risk-return...

This paper discusses how the term-structure of equity implied volatility translates into market expectations for return auto-correlation. The derived measure is a forward-looking metric of return persistence and expected market efficiency. The linkage is built in a non-parametric fashion,...

For many endowment funds and sovereign wealth funds draws tend to be tied to the expected financial returns. As shown by Dybvig and Qin, such a rule will eventually deplete the fund even if its value is preserved in expectation. We add to their results by finding that, if the financial returns...

This paper investigates the effects of dynamic capital market conditions in a general equilibrium model, employing a process of switching steady-state levels of the volatility of market conditions (SS-uncertainty). Decision-makers predict SS-uncertainty regimes using past fundamental shocks, but...

We examine contributions that noise can make to the objective of detecting signal in agent expectations for price in financial markets. Although contrary to most assumptions on exogenous noise in financial markets as increasing both risk and uncertainty in the detection of signal, a basis for...

Combining experimental datasets from seven individual studies, including 255 asset markets with 2,031 participants, and 36,326 short-term price forecasts, we analyze the role of heterogeneity of beliefs in the organization of trading behavior by reproducing and reconsidering earlier experimental...

How do macroeconomic expectations affect consumer decisions? We examine this question using an experiment with 2,872 credit card customers at a large commercial bank. We provide participants with expert forecasts of inflation and the nominal exchange rate and measure the consumption response to...

Movements in expected returns (ER) can cause a bias in measured autocorrelations, and the resulting spurious component is positive for infrequent regime shifts. We demonstrate this point analytically and investigate its empirical prevalence. In a key contribution, we use shifts in ex ante ER...

We investigate the extent to which managers incorporate public information in their earnings expectations and its implications for capital market efficiency. We find that management earnings forecasts are more pessimistic for stocks that are undervalued based on anomaly signals. This...