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We present a unified and quantitatively credible explanation for the joint behavior of stock prices and business cycles. We consider a frictionless production economy with time-separable consumption preferences and perfectly áexible labor supply. Investors extrapolate past stock price gains but...
Persistent link: https://www.econbiz.de/10012893442
The booms and busts in U.S. stock prices over the post-war period can to a large extent be explained by fluctuations in investors' subjective capital gains expectations. Survey measures of these expectations display excessive optimism at market peaks and excessive pessimism at market troughs....
Persistent link: https://www.econbiz.de/10013018988
We study the distributional consequences of housing price, bond price and equity price increases for Euro Area households using data from the Household Finance and Consumption Survey (HFCS). The capital gains from bond price and equity price increases turn out to be concentrated among relatively...
Persistent link: https://www.econbiz.de/10012988678
We present a simple model that quantitatively replicates the behavior of stock prices and business cycles in the United States. The business cycle model is standard, except that it features extrapolative belief formation in the stock market, in line with the available survey evidence....
Persistent link: https://www.econbiz.de/10013315341
Asset prices reflect investors' subjective beliefs about future cash flows and prices. In this chapter, we review recent research on the formation of these beliefs and their role in asset pricing. Return expectations of individual and professional investors in surveys differ markedly from those...
Persistent link: https://www.econbiz.de/10013290074
Asset prices reflect investors' subjective beliefs about future cash flows and prices. In this chapter, we review recent research on the formation of these beliefs and their role in asset pricing. Return expectations of individual and professional investors in surveys differ markedly from those...
Persistent link: https://www.econbiz.de/10013191072
Persistent link: https://www.econbiz.de/10003574542
Introducing bounded rationality into a standard consumption based asset pricing model with a representative agent and time separable preferences strongly improves empirical performance. Learning causes momentum and mean reversion of returns and thereby excess volatility, persistence of...
Persistent link: https://www.econbiz.de/10003747965
Persistent link: https://www.econbiz.de/10011452117
We present a stock market model that quantitatively replicates the joint behavior of stock prices, trading volume and investor expectations. Stock prices in the model occasionally display belief-driven boom and bust cycles that delink asset prices from fundamentals and redistribute considerable...
Persistent link: https://www.econbiz.de/10011491907