Equilibrium Portfolio Strategies in the Presence of Sentiment Risk and Excess Volatility

• 成果类型: Article
• 署名作者: Dumas, Bernard; Kurshev, Alexander; Uppal, Raman
• 署名单位: Swiss Finance Institute (SFI); University of Lausanne; University of London; London Business School
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2009.01444.x
• 发表日期: 2009
• 页码: 579-629
• 关键词: STOCK-PRICE VOLATILITY; asset prices; habit formation; long-run; consumption; MARKET; MODEL; predictability; overreaction; expectations

摘要

Our objective is to identify the trading strategy that would allow an investor to take advantage of excessive stock price volatility and sentiment fluctuations. We construct a general equilibrium difference-of-opinion model of sentiment in which there are two classes of agents, one of which is overconfident about a public signal, while still optimizing intertemporally. Overconfident investors overreact to the signal and introduce an additional risk factor causing stock prices to be excessively volatile. Consequently, rational investors choose a conservative portfolio; moreover, this portfolio depends not just on the current price divergence but also on their prediction about future sentiment and the speed of price convergence.