Asset Pricing and Welfare Analysis with Bounded Rational Investor
Motivated by the fact that investors have limited ability and insuffi cient knowledge to process the wealth of information, I model investorsbounded rational behavior in processing information and investigate its implications on asset pricing. Bounded rational investors perceive correlated information (which consists of news items that are correlated with fundamentals, but provide no information on them) as fundamental information (which consists of news items about expected changes in fundamentals). This process generates bounded rational risk. Asset prices and volatilities of asset returns are derived. Specifically, the equity premium and the stock volatility are increased under some conditions. I also analyze the welfare impact of investorsbounded rational behavior.
asset pricing bounded rationality general equilibrium heterogeneous beliefs
Lei Lu
School of Finance,Shanghai University of Finance and Economics
国际会议
大连
英文
1-47
2008-07-02（万方平台首次上网日期，不代表论文的发表时间）