Heterogeneous beliefs and diversification discount

Zhuoyuan Tong and Xu Wei

Finance Research Letters, 2018, vol. 27, issue C, 148-153

Abstract: In an asset pricing model with investors’ heterogeneous beliefs, this work shows that the share price of a parent firm is lower than the sum of share prices of its subsidiary firms. This result provides an explanation for the well-documented “diversification discount” puzzle.

Keywords: Heterogeneous beliefs; Diversification discount; Short-sales constraints (search for similar items in EconPapers)
JEL-codes: D4 D8 G1 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:27:y:2018:i:c:p:148-153

DOI: 10.1016/j.frl.2018.02.006

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