Why Disagreement May Not Matter (much) for Asset Prices

Paul Söderlind

University of St. Gallen Department of Economics working paper series 2008 from Department of Economics, University of St. Gallen

Abstract: A simple consumption-based two-period model is used to study the (theoretical) effects of disagreement on asset prices. Analytical and numerical results show that individual uncertainty has a much larger effect on risk premia than disagreement if (i) the risk aversion is reasonably high and (ii) individual uncertainty is not much smaller than disagreement. Evidence from survey data on beliefs about output growth suggests that the latter is more than satisfied.

Keywords: riskfree rate; implied volatility; Survey of Professional Forecasters (search for similar items in EconPapers)
JEL-codes: C42 E44 G12 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2008-05
New Economics Papers: this item is included in nep-dge, nep-mac and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Why disagreement may not matter (much) for asset prices (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:usg:dp2008:2008-11

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