Choosing to Disagree: Endogenous Dismissiveness and Overconfidence in Financial Markets

• 成果类型: Article
• 署名作者: Banerjee, Snehal; Davis, Jesse; Gondhi, Naveen
• 署名单位: University of California System; University of California San Diego; University of North Carolina; University of North Carolina Chapel Hill; INSEAD Business School; University of North Carolina; University of North Carolina Chapel Hill
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13311
• 发表日期: 2024
• 页码: 1635-1695
• 关键词: NOISY RATIONAL-EXPECTATIONS; information acquisition; stock-market; utility; prices; consumption; attention; returns; traders; MODEL

摘要

The psychology literature documents that individuals derive current utility from their beliefs about future events. We show that, as a result, investors in financial markets choose to disagree about both private information and price information. When objective price informativeness is low, each investor dismisses the private signals of others and ignores price information. In contrast, when prices are sufficiently informative, heterogeneous interpretations arise endogenously: most investors ignore prices, while the rest condition on it. Our analysis demonstrates how observed deviations from rational expectations (e.g., dismissiveness, overconfidence) arise endogenously, interact with each other, and vary with economic conditions.