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Equilibrium portfolio strategies in the presence of sentiment risk and excess volatility

Uppal, Raman - ; Dumas, Bernard - ; Kurshev, Alexander - ;

Our objective is to identify the trading strategy that would allow an investor to take advantage of "excessive" stock price volatility and "sentiment" fluctuations. We construct a general equilibrium "difference-of-opinion" model of sentiment in which there are two classes of agents, one of which is overconfident about a public signal, while still optimizing intertemporally. Overconfident investors overreact to the signal and introduce an additional risk factor causing stock prices to be excessively volatile. Consequently, rational investors choose a conservative portfolio; moreover, this portfolio depends not just on the current price divergence but also on their prediction about future sentiment and the speed of price convergence.Printed journal


Ketersediaan

Call NumberLocationAvailable
PSB lt.dasar - Pascasarjana1
Penerbit: The American Finance Association
Edisi-
SubjekEquilibrium
Investment policy
Models
Volatility
Stock prices
studies
Risk factors
ISBN/ISSN221082
Klasifikasi-
Deskripsi Fisik-
Info Detail Spesifik-
Other Version/RelatedTidak tersedia versi lain
Lampiran BerkasTidak Ada Data

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