Asset pricing with mean reversion: The case of ships

Ioannis C. Moutzouris and Nikos K. Nomikos

Journal of Banking & Finance, 2020, vol. 111, issue C

Abstract: We develop a heterogeneous-beliefs asset pricing model with microeconomic foundations that reproduces asset prices, cash flows and trading activity in a real asset economy. In contrast to the majority of financial markets’ behavioural models, and in line with the nature of the shipping industry, in this model agents extrapolate fundamentals. Formal estimation of the model indicates that an economy where a small fraction of agents significantly extrapolates fundamentals can explain the positive relation between earnings, vessel prices, and trading activity.

Keywords: Behavioural finance; Asset pricing; Biased beliefs; Cash flow Extrapolation; Heterogeneous-agents (search for similar items in EconPapers)
JEL-codes: G02 G11 G12 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:111:y:2020:i:c:s0378426619302821

DOI: 10.1016/j.jbankfin.2019.105708

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