IFin Seminar, Pascal Maenhout, INSEAD - "Robustness and Dynamic Sentiment"
Istituto di finanza
Data: 27 Maggio 2021 / 12:25 - 13:25
Oratore: Pascal Maenhout, INSEAD
Tema: “Robustness and Dynamic Sentiment"
Data: 27 maggio 2021
Ore: 12:25 - 13:25
Luogo: Aula virtuale
Campus di Lugano
Abstract:
Errors in survey expectations display waves of pessimism and optimism and significant sluggishness. This paper develops a novel theoretical framework of time-varying beliefs capturing these empirical facts. In our model, the dynamic beliefs arise endogenously due to agents’ attitude toward alternative models. Decision-maker’s distorted beliefs generate countercyclical risk aversion, procyclical portfolio weights, countercyclical equilibrium asset returns, and excess volatility. A calibrated version of our model is shown to match salient features in equity markets.
