Higher order expectations in sentiment asset pricing model

Chunpeng Yang and Chuangqun Cai

Economic Modelling, 2014, vol. 39, issue C, 95-100

Abstract: In the spirit of beauty contests, we study the effect of higher order expectations on sentiment asset pricing. The sentiment asset pricing model with higher order expectations shows that, in general the higher sentiment causes the higher price, but, higher order expectations contribute to smoother price path and defend the impact of sentiment. Regarding the problem of taking higher order or first order, the investors with second order can survive in a specific area where sentiment is rather optimistic or pessimistic and investors with first order expectations are the majority.

Keywords: Behavioral finance; Investor sentiment; Sentiment asset pricing model; Higher order expectations (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:39:y:2014:i:c:p:95-100

DOI: 10.1016/j.econmod.2014.02.033

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