2026-04-13T14:56:46Zhttps://recercat.cat/oai/requestoai:recercat.cat:10230/338822025-12-24T02:05:37Zcom_2072_6col_2072_452953
RECERCAT
author
Cerigioni, Francesco
2018-02-14T15:29:59Z2018-02-14T15:29:59Z2016-09-142017-07-23T02:18:21Z
Evidence from nancial markets suggests that asset prices can be consistently far from their funda-
mental value. Prices seem to underreact to news in the short-run and overreact in the long-run. In
this paper, we use Dual Process Theory to describe traders behavior. In particular, a part of traders
holds wrong beliefs anytime the market environment does not change suciently. The proportion of
traders with wrong beliefs will depend on how similar past market environments are with the present
one. We show that such model not only can be seen as a way of endogenizing noise trading, but
also provides a justication for noise traders' beliefs and it shows that underreaction and overreaction
naturally arise in such framework. Finally, we discuss how the model might help understanding the
emergence of the equity-premium puzzle and its variation through time.
L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons http://creativecommons.org/licenses/by-nc-nd/3.0/es/ info:eu-repo/semantics/openAccess
asset pricing
dual processes
noise trading
underreaction
overreaction
equity-premium puzzle
Behavioral and Experimental Economics
Dual decision processes and noise trading
info:eu-repo/semantics/workingPaper