Learning to Agree: A New Perspective on Price Drift

Andrea Giusto ()

Economics Bulletin, 2015, vol. 35, issue 1, 276-282

Abstract: This paper introduces statistical learning in an asset pricing model of differences of opinions. I show that the model converges to the unique rational-expectation equilibrium and furthermore I show that asset prices drift predictably in its neighborhood. Accordingly, the model offers a unifying perspective between two so-far mutually exclusive strands of the asset pricing literature. Learning preserves all the desirable features offered by the rational-expectations hypothesis (i.e. the traders use efficiently both the private and the public information available) while yet implying asset prices that drift predictably in the ex-ante sense of Banerjee et al. (2009).

Keywords: heterogeneous beliefs; price drift; asset pricing. (search for similar items in EconPapers)
JEL-codes: E0 E3 (search for similar items in EconPapers)
Date: 2015-03-11
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http://www.accessecon.com/Pubs/EB/2015/Volume35/EB-15-V35-I1-P31.pdf (application/pdf)

Related works:
Working Paper: Learning to Agree: A New Perspective on Price Drift (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ebl:ecbull:eb-14-00647

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