Disagreement of Disagreement

Christian L. Goulding, Campbell Harvey and Hrvoje Kurtović

No 35049, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We show that major investor disagreement proxies have near zero correlation – making disagreement pricing inferences challenging. We develop a frictionless model that generates overpricing from latent disagreement, jointly rationalizes major proxies, and generates new testable predictions. Equilibrium interrelationships motivate a new disagreement measure, DIS, which is more predictive of returns cross-sectionally than major proxies and more consistently predictive across macroeconomic regimes. We provide evidence that the friction-based channel of Miller (1977) and a frictionless mechanism coexist and are empirically separable. DIS also provides a micro-founded, disagreement-based account of the IVOL puzzle, absorbing IVOL's predictability while revealing its regime and friction dependence.

JEL-codes: G11 G12 G14 M40 (search for similar items in EconPapers)
Date: 2026-04
Note: AP
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