 Heterogeneous beliefs with herding behaviors and asset pricing in two goods worldHailong Wang and Duni Hu The North American Journal of Economics and Finance, 2021, vol. 57, issue C Abstract: We construct a incomplete information equilibrium model with heterogeneous beliefs and herding behaviors to identify their joint effects on the dynamics of asset prices. Herding behaviors make investors revise some of their estimations about expected growth rates of goods streams toward to the other one’s by a manner of weighted average of their own forecast and the other’s. As we expected, herding behaviors generate influences on the Radon Nikodym derivative, that is so-called “sentiment” as in Dumas et al. (2009), and in turn not only impact the dynamics of asset prices but also generate influences on investors’ survivals. We also show that introducing heterogeneous beliefs with herding behaviors permits to explain both the Backus–Smith puzzle and the mixed results about the influences of herding behaviors on asset prices. Moreover, we uncover that herding behaviors have positive influences on stocks’ risk premiums. Keywords: Heterogeneous belief; Herding behavior; Asset pricing; Backus–Smith puzzle; Risk premium (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:57:y:2021:i:c:s1062940821000632 DOI: 10.1016/j.najef.2021.101434 Access Statistics for this article The North American Journal of Economics and Finance is currently edited by Hamid Beladi More articles in The North American Journal of Economics and Finance from Elsevier |
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