A common criticism of behavioral economics is that it has not shown that the psychological biases of individual investors lead to aggregate long-run effects on both asset prices and macroeconomic quantities. Our objective is to address this criticism by providing a simple example of a production...

Our objective is to understand the trading strategy that would allow an investor to take advantage of quot;excessivequot; stock price volatility and quot;sentimentquot; fluctuations. We construct a general equilibrium model of sentiment. In it, there are two classes of agents and stock prices...