Salience and Asset Prices
Pedro Bordalo,
Nicola Gennaioli and
Andrei Shleifer
No 18708, NBER Working Papers from National Bureau of Economic Research, Inc
Abstract:
We present a simple model of asset pricing in which payoff salience drives investors' demand for risky assets. The key implication is that extreme payoffs receive disproportionate weight in the market valuation of assets. The model accounts for several puzzles in finance in an intuitive way, including preference for assets with a chance of very high payoffs, an aggregate equity premium, and countercyclical variation in stock market returns.
JEL-codes: D84 G11 G12 (search for similar items in EconPapers)
Date: 2013-01
Note: AP
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Citations: View citations in EconPapers (91)
Published as Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2013. "Salience and Asset Prices," American Economic Review, American Economic Association, vol. 103(3), pages 623-28, May.
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Journal Article: Salience and Asset Prices (2013)
Working Paper: Salience and Asset Prices (2013)
Working Paper: Salience and Asset Prices
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