Equilibrium with divergence of opinion

Edward Miller
Additional contact information
Edward Miller: University of New Orleans

No 1999-17, Working Papers from University of New Orleans, Department of Economics and Finance

Abstract: Because the less informed incorrectly estimate asset returns, they anticipate higher returns from their risky investments. They thus over-invest in risky securities. They are rewarded by higher total portfolio returns. Too high a proportion of less informed investors lowers the return on risky assets. Equilibrium requires that the less informed’s rate of return equal the informed’s. The less informed control a stable equilibrium percentage of total wealth. Because an individual’s recent investment experience correlates with his terminal wealth, learning need not reduce the less informed’s risky asset exposure. Implications exist for the slope of the return versus systematic risk curve.

Keywords: High-risk securities; Investment strategies (search for similar items in EconPapers)
JEL-codes: G11 G12 G34 (search for similar items in EconPapers)
Pages: 29 pages
Date: 1999
References: Add references at CitEc
Citations:

Downloads: (external link)
http://louisdl.louislibraries.org/cgi-bin/showfile.exe?CISOROOT=/EFW&CISOPTR=17 (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to louisdl.louislibraries.org:80 (No such host is known. )

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:uno:wpaper:1999-17

Access Statistics for this paper

More papers in Working Papers from University of New Orleans, Department of Economics and Finance Contact information at EDIRC.
Bibliographic data for series maintained by Janet Murphy Crane ().