Asset pricing with return extrapolation

• 成果类型: Article
• 署名作者: Jin, Lawrence J.; Sui, Pengfei
• 署名单位: California Institute of Technology; The Chinese University of Hong Kong, Shenzhen; The Chinese University of Hong Kong, Shenzhen
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2021.10.009
• 发表日期: 2022
• 页码: 273-295
• 关键词: expectations; Extrapolation; asset prices

摘要

We present a new model of asset prices in which a representative agent has extrapolative beliefs about stock market returns and Epstein-Zin preferences. The model quantitatively explains facts about asset prices, return expectations, and cash-flow expectations. When the agent's beliefs about stock market returns are calibrated to survey expectations of investors, the model generates excess volatility and predictability of stock market returns, a high equity premium, a low and stable risk-free rate, and a low correlation between stock market returns and consumption growth. Moreover, the model has implications for expectations about future cash flows that are consistent with empirical findings. (C) 2021 Elsevier B.V. All rights reserved.