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Asset prices and portfolio choice with learning from experience



Publishing details

IFA Working Paper

Authors / Editors

Ehling P;Graniero A;Heyerdahl-Larsen C

Publication Year



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.


Learning from Experience; Trend Chasing; Survey Based versus Objective Expected Returns


IFA Working Paper

Available on ECCH


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