Can investors with irrational beliefs be neglected as long as they are rational on average ? Does unbiased disagreement lead to trades that cancel out with no consequences on prices, as implicitly assumed by the traditional models ? We show in this paper that there is an important impact of...

In this paper we study some foundational issues in the theory of asset pricing with market frictions. We model market frictions by letting the set of marketed contingent claims (the opportunity set) be a convex set, and the pricing rule at which these claims are available be convex. This is the...

In Jouini and Kallal (1995a), the authors characterized the absence of arbitrage opportunities for contingent claims with cash delivery in the presence of bid-ask spreads. Other authors obtained similar results for a more general de nition of the contingent claims but assuming some speci c price...

We consider a complete financial market with primitive assets and derivatives on these primitive assets. Nevertheless, the derivative assets are non-redundant in the market, in the sense that the market is complete, only with their existence. In such a framework, we derive an equilibrium...

This paper studies foundational issues in securities markets models with fixed costs of trading, i.e. transactions costs that are bounded regardless of the transaction size, such as fixed brokerage fees, investment taxes, operational, and processing costs or opportunity costs. We show that the...

The problem of fair pricing of contingent claims is well understood in the contex of an arbitrage free, complete financial market, with perfect information : the so-called arbitrage approach permits to construct a unique valuation operator compatible with observed price rocesses. In the more...

Our aim is to analyze the link between optimism and risk aversion in a subjective expected utility setting and to estimate the average level of optimism when weighted by risk tolerance. Its estimation leads to a non-trivial statistical problem. We start from a large lottery survey (1536...

This paper is a generalization of [Calvet, L., Grandmont, J.-M., Lemaire, I., 2002. Aggregation of heterogenous beliefs and asset pricing in complete financial markets. Working paper] to a dynamic setting. We propose a method to aggregate heterogeneous individual probability beliefs, in dynamic...

Under a comonotonicity assumption between aggregate dividends and the market portfolio, the CCAPM formula becomes more tractable and more easily testable. In this paper, we provide theoretical justifications for such an assumption.

We analyze the link between pessimism and risk-aversion. We consider a model of partially revealing, competitive rational expectations equilibrium with diverse information, in which the distribution of risk-aversion across individuals is unknown. We show that when a high individual level of...