Asset Prices, Heterogeneous Expectations, and Limited Short Sales

Cheolbeom Park ()

Departmental Working Papers from National University of Singapore, Department of Economics

Abstract: This paper extends the Harrison-Kreps model by allowing limited short sales. The main results of this paper are: (1) investors pursue short-term gains when perceiving heterogeneous expectations; (2) important properties of the equilibrium price in the Harrison-Kreps model still hold even when limited short sales are allowed; (3) an increase in the dispersion of expectations about future dividends raises the risky asset price; and (4) an increase in short-sale costs also raises the risky asset price.

Keywords: Heterogeneous expectations; Dispersion in expectations; Limited short sales; Short-sale cost (search for similar items in EconPapers)
JEL-codes: G10 G12 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cfn, nep-fin, nep-fmk and nep-rmg
Date: 2003-07
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Persistent link: http://EconPapers.repec.org/RePEc:nus:nusewp:wp0308

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