Affine Disagreement and Asset Pricing
Models of heterogeneous beliefs can generate rich implications for trading and asset pricing (see Suleyman Basak 2005 for a recent survey). When studying such models, aggregation often leads to difficulty in computing equilibrium outcomes. In this paper, we introduce a flexible framework to mo...
| Main Authors: | , , |
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| Other Authors: | |
| Format: | Article |
| Language: | en_US |
| Published: |
American Economic Association
2011
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| Online Access: | http://hdl.handle.net/1721.1/65929 https://orcid.org/0000-0001-9605-641X |
| _version_ | 1811097504613138432 |
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| author | Chen, Hui Joslin, Scott Stephen Walter Tran, Ngoc-Khanh |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Chen, Hui Joslin, Scott Stephen Walter Tran, Ngoc-Khanh |
| author_sort | Chen, Hui |
| collection | MIT |
| description | Models of heterogeneous beliefs can generate
rich implications for trading and asset pricing
(see Suleyman Basak 2005 for a recent survey).
When studying such models, aggregation often
leads to difficulty in computing equilibrium
outcomes. In this paper, we introduce a flexible
framework to model heterogeneous beliefs
in the economy, which we refer to as “affine’’
disagreement about fundamentals. Affine processes
(see Darrel Duffie, Jun Pan, and Kenneth
Singleton 2000) are appealing as they provide
a large degree of flexibility in modeling the
conditional means, volatilities, and jumps for
various quantities of interest while remaining
analytically tractable. Our affine heterogeneous
beliefs framework allows further for stochastic
disagreement among agents about growth rates,
volatility dynamics, as well as the likelihood of
jumps and the distribution of jump sizes. |
| first_indexed | 2024-09-23T17:00:28Z |
| format | Article |
| id | mit-1721.1/65929 |
| institution | Massachusetts Institute of Technology |
| language | en_US |
| last_indexed | 2024-09-23T17:00:28Z |
| publishDate | 2011 |
| publisher | American Economic Association |
| record_format | dspace |
| spelling | mit-1721.1/659292022-10-03T09:46:39Z Affine Disagreement and Asset Pricing Chen, Hui Joslin, Scott Stephen Walter Tran, Ngoc-Khanh Sloan School of Management Chen, Hui Chen, Hui Joslin, Scott Stephen Walter Tran, Ngoc-Khanh Models of heterogeneous beliefs can generate rich implications for trading and asset pricing (see Suleyman Basak 2005 for a recent survey). When studying such models, aggregation often leads to difficulty in computing equilibrium outcomes. In this paper, we introduce a flexible framework to model heterogeneous beliefs in the economy, which we refer to as “affine’’ disagreement about fundamentals. Affine processes (see Darrel Duffie, Jun Pan, and Kenneth Singleton 2000) are appealing as they provide a large degree of flexibility in modeling the conditional means, volatilities, and jumps for various quantities of interest while remaining analytically tractable. Our affine heterogeneous beliefs framework allows further for stochastic disagreement among agents about growth rates, volatility dynamics, as well as the likelihood of jumps and the distribution of jump sizes. 2011-09-22T13:42:06Z 2011-09-22T13:42:06Z 2010-05 Article http://purl.org/eprint/type/JournalArticle 0002-8282 1944-7981 http://hdl.handle.net/1721.1/65929 Chen, Hui, Scott Joslin, and Ngoc-Khanh Tran. “Affine Disagreement and Asset Pricing.” American Economic Review 100.2 (2010) : 522-526. © 2010 The American Economic Association https://orcid.org/0000-0001-9605-641X en_US http://dx.doi.org/10.1257/aer.100.2.522 American Economic Review Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use. application/pdf American Economic Association AEA |
| spellingShingle | Chen, Hui Joslin, Scott Stephen Walter Tran, Ngoc-Khanh Affine Disagreement and Asset Pricing |
| title | Affine Disagreement and Asset Pricing |
| title_full | Affine Disagreement and Asset Pricing |
| title_fullStr | Affine Disagreement and Asset Pricing |
| title_full_unstemmed | Affine Disagreement and Asset Pricing |
| title_short | Affine Disagreement and Asset Pricing |
| title_sort | affine disagreement and asset pricing |
| url | http://hdl.handle.net/1721.1/65929 https://orcid.org/0000-0001-9605-641X |
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