This paper presents a simple rational expectations model of intertemporal asset pricing. Heterogeneous risk aversion of investors is likely to generate declining aggregate relative risk aversion which leads to predictability of asset returns and high and persistent volatility. Stock market...

We perform an asset market experiment in order to test the central result coming from the new overconfidence models, namely that high levels of overconfidence lead to enhanced trading activity. We find that overconfidence does engender additional trade. Unlike previous experimental or...

As a group, market forecasters are egregiously overconfident. In conformity to the dynamic model of overconfidence of Gervais and Odean (2001), successful forecasters become more overconfident. What's more, more experienced forecasters have quot;learned to be overconfident,quot; and hence are...

Recent research suggests that the power law is one of the most universal laws in nature and it also seems to work quite fine in economics and finance. In this paper we show that the power law explains extremely well the relationship between the value of broad-based market indices and their...

This paper presents and compares several time-series models for returns of broad-based stock indices. These models nest a nonlinear asymmetric GARCH (NGARCH) model as a special case. Some of these models are empirically motivated as-hoc specifications others are derived from a representative...

The German savings banks’ distribution of profits among their public owners (i. e. municipalities and districts) requires that legal criteria are met ensuring the banks’ adequate funding via retained profits. In line with the legal framework, our analysis of savings banks in four federal...

We analyse whether the determinants of capital found in the previous literature hold for the special German banking sector comprising three characteristic banking groups including savings banks, cooperative banks and other banks, which differ regarding their ownership and their access to the...