A general equilibrium model of investor sentiment

Giulio Bottazzi and Daniele Giachini

Economics Letters, 2022, vol. 218, issue C

Abstract: This paper studies the occurrence of price momentum and reversal in a general equilibrium setting, with complete markets and expected utility maximizing agents. We show that price anomalies can generically emerge when agents derive their individual probabilities from reinforcing and progressive learning processes defined over misspecified models.

Keywords: Momentum; Continuation; Reversal; Biased learning; Bayesian learning; Model misspecification (search for similar items in EconPapers)
JEL-codes: D53 D83 G12 G41 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:218:y:2022:i:c:s0165176522002658

DOI: 10.1016/j.econlet.2022.110749

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