Asset pricing with distorted beliefs
are equity returns too good to be true? / Stephen G. Cecchetti, Pok-sang Lam, Nelson C. Mark.
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Author
Contributions
- Lam, Pok-sang. - Contributor
- Mark, Nelson C. 1955- - Contributor
- National Bureau of Economic Research. - Contributor
Publication
1998 - National Bureau of Economic Research, Cambridge, Mass, Massachusetts
Language
English
Word Count
5,750 words, Guess
Page Count
23 pages
Identifiers
- OCLC Control Number38528556
- Open LibraryOL22404050M
Description
We study a Lucas asset pricing model that is standard in all respects representative agent's subjective beliefs about endowment growth are distorted. Using constant-relative-risk-aversion (CRRA) utility a CRRA coefficient below ten that exhibit, on average, excessive pessimism over expansions and excessive optimism over contractions, our model is able to match the first and second moments of the equity premium and risk-free rate, as well as the persistence and predictability of excess returns found in the data.
Subjects
Topics
Places
Series Statement
- NBER working paper series -- working paper 6354
- Working paper series (National Bureau of Economic Research) -- working paper no. 6354.
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