Asset prices and portfolio choice with learning from experience
Subject
Finance
Publishing details
IFA Working Paper
Authors / Editors
Ehling P;Graniero A;Heyerdahl-Larsen C
Publication Year
2016
Abstract
We study asset prices and portfolio choice in an overlapping generations economy in which the young disregard history to learn from own experience. In equilibrium, the young act as trend chasers as they increase their investment in risky assets after a positive return. Since the young have less precise estimates of consumption growth they lose wealth and consumption shares to the old. Consistent with findings from survey data, the average belief about expected returns in the economy is negatively related to future realized returns.
Keywords
Learning from Experience; Trend Chasing; Survey Based versus Objective Expected Returns
Series
IFA Working Paper
Available on ECCH
No
