Since the early 2000s, the importance of financial literacy for safe financial behaviors has increased in public debate and has been the motivation for several national and international institutions to launch and promote financial education initiatives. Although discussion on the effects of...

The monetary unit assumption of financial accounting assumes a stable currency (i.e., constant purchasing power over time). Yet, even during periods of low inflation or deflation, nominal financial statements violate this assumption. I posit that, while the effects of inflation are not...

Since the early 2000s, the importance of financial literacy for safe financial behaviors has increased in public debate and has been the motivation for several national and international institutions to launch and promote financial education initiatives. Although discussion on the effects of...

In an asset-pricing model, risk-averse agents need to forecast the conditional variance of a stock's return. A near-rational restricted perceptions equilibrium exists in which agents believe prices follow a random walk with a conditional variance that is self-fulfilling. When agents estimate...

This paper demonstrates that an asset pricing model with least-squares learning can lead to bubbles and crashes as endogenous responses to the fundamentals driving asset prices. When agents are risk-averse they generate forecasts of the conditional variance of a stock's return. Recursive...

This paper advocates a theory of expectation formation that incorporates many of the central motivations of behavioral finance theory while retaining much of the discipline of the rational expectations approach. We provide a framework in which agents, in an asset pricing model, underparameterize...