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Heterogeneous Beliefs and Asset Pricing in Discrete Time : an Analysis of Pessimism and Doubt

Jouini, Elyès; Napp, Clotilde (2006), Heterogeneous Beliefs and Asset Pricing in Discrete Time : an Analysis of Pessimism and Doubt, Journal of Economic Dynamics and Control, 30, 7, p. 1233-1260. http://dx.doi.org/10.1016/j.jedc.2005.05.008

Type
Article accepté pour publication ou publié
External document link
http://halshs.archives-ouvertes.fr/halshs-00151536/en/
Date
2006
Journal name
Journal of Economic Dynamics and Control
Volume
30
Number
7
Publisher
Elsevier
Pages
1233-1260
Publication identifier
http://dx.doi.org/10.1016/j.jedc.2005.05.008
Metadata
Show full item record
Author(s)
Jouini, Elyès
Napp, Clotilde cc
Abstract (EN)
The aim of the paper is to analyze the impact of heterogeneous beliefs in an otherwise standard competitive complete markets discrete time economy. The construction of a consensus belief, as well as a consensus consumer are shown to be valid modulo a predictable aggregation bias, which takes the form of a discount factor. We use our construction of a consensus consumer to investigate the impact of beliefs heterogeneity on the CCAPM and on the expression of the risk free rate. We focus on the pessimism/doubt of the consensus consumer and we study their impact on the equilibrium characteristics (market price of risk, risk free rate). We finally analyze how pessimism and doubt at the aggregate level result from pessimism and doubt at the individual level.
Subjects / Keywords
Beliefs Heterogeneity; Consensus; Pessimism; Asset Pricing
JEL
G12 - Asset Pricing; Trading Volume; Bond Interest Rates
D80 - General

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