| 来源类型 | Discussion paper
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| 规范类型 | 论文
|
| 来源ID | DP12415
|
| DP12415 Do Individual Behavioral Biases Affect Financial Markets and the Macroeconomy? |
| Harjoat Singh Bhamra
|
| 发表日期 | 2017-11-01
|
| 出版年 | 2017
|
| 语种 | 英语
|
| 摘要 | A common criticism of behavioral economics is that it has not shown that the psychological biases of individual investors lead to aggregate long-run effects on both asset prices and macroeconomic quantities. Our objective is to address this criticism by providing a simple example of a production economy where individual portfolio biases cancel when summed across investors, but still have an effect on aggregate quantities that does not vanish in the long-run. Specifically, we solve in closed form a model of a stochastic general-equilibrium production economy with a large number of heterogeneous firms and investors. Investors in our model are averse to ambiguity and so hold portfolios biased toward familiar assets. We specify this bias to be unsystematic so it cancels out when aggregated across investors. However, because of holding underdiversified portfolios, investors bear more risk than necessary, which distorts the consumption of all investors in the same direction. Hence, distortions in consumption do not cancel out in the aggregate and therefore increase the price of risk and distort aggregate investment and growth. The increased risk from holding biased portfolios, which increases the demand for the risk-free asset, leading to a higher equity risk premium and a lower risk-free rate that match the values observed empirically. Furthermore, all investors survive in the long-run, and so the effects of their biases never vanish. Our analysis illustrates that idiosyncratic behavioral biases can have long-run distortionary effects on both financial markets and the macroeconomy. |
| 主题 | Financial Economics
|
| 关键词 | Behavioral finance
ambiguity aversion
Underdiversification
Aggregate growth
investment
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| URL | https://cepr.org/publications/dp12415
|
| 来源智库 | Centre for Economic Policy Research (United Kingdom)
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| 资源类型 | 智库出版物
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| 条目标识符 | http://119.78.100.153/handle/2XGU8XDN/541224
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推荐引用方式
GB/T 7714 |
Harjoat Singh Bhamra. DP12415 Do Individual Behavioral Biases Affect Financial Markets and the Macroeconomy?. 2017.
|
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