| 来源类型 | Discussion paper
|
| 规范类型 | 论文
|
| 来源ID | DP5381
|
| DP5381 Network Competition and Entry Deterrence |
| Tommaso Valletti; Joan Calzada
|
| 发表日期 | 2005-11-22
|
| 出版年 | 2005
|
| 语种 | 英语
|
| 摘要 | Our objective is to understand the trading strategy that would allow an investor to take advantage of 'excessive' stock price volatility and 'sentiment' fluctuations. We construct a general equilibrium model of sentiment. In it, there are two classes of agents and stock prices are excessively volatile because one class is overconfident about a public signal. As a result, this class of irrational agents changes its expectations too often, sometimes being excessively optimistic, sometimes being excessively pessimistic. We determine and analyse the trading strategy of the rational investors who are not overconfident about the signal. We find that because irrational traders introduce an additional source of risk, rational investors reduce the proportion of wealth invested into equity except when they are extremely optimistic about future growth. Moreover, their optimal portfolio strategy is based not just on a current price divergence but also on a model of irrational behaviour and a prediction concerning the speed of convergence. Thus, the portfolio strategy includes a protection in case there is a deviation from that prediction. We find that long maturity bonds are an essential accompaniment of equity investment, as they serve to hedge this 'sentiment risk.' Even though rational investors find it beneficial to trade on their belief that the market is excessively volatile, the answer to the question posed in the title is: 'There is little that rational investors can do optimally to exploit, and hence, eliminate excessive volatility, except in the very long run.' |
| 主题 | Financial Economics
|
| 关键词 | Behavioural equilibrium theory
Non-bayesian behaviour
Portfolio choice
|
| URL | https://cepr.org/publications/dp5381
|
| 来源智库 | Centre for Economic Policy Research (United Kingdom)
|
| 资源类型 | 智库出版物
|
| 条目标识符 | http://119.78.100.153/handle/2XGU8XDN/534231
|
推荐引用方式
GB/T 7714 |
Tommaso Valletti,Joan Calzada. DP5381 Network Competition and Entry Deterrence. 2005.
|
除非特别说明，本系统中所有内容都受版权保护，并保留所有权利。
