Asset Pricing with Distorted Beliefs: Are Equity Returns Too Good To Be True?

作者： Stephen G Cecchetti , Pok-Sang Lam , Nelson C Mark

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摘要: We study a Lucas asset-pricing model that is standard in all respects, except the representative agent's subjective beliefs about endowment growth are distorted. Using constant relative risk-aversion (CRRA) utility, with CRRA coefficient below 10; fluctuating exhibit, on average, excessive pessimism over expansions; and optimism contractions (both ending more quickly than data suggest), our able to match first second moments of equity premium risk-free rate, as well persistence predictability excess returns found data. (JEL E44, G12)

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Asset Pricing with Distorted Beliefs: Are Equity Returns Too Good To Be True?

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Asset Pricing with Distorted Beliefs: Are Equity Returns Too Good To Be True?

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