Asset Pricing with Distorted Beliefs: Are Equity Returns Too Good To Be True?

By Stephen G. Cecchetti, Pok-sang Lam, Nelson C. Mark. 2000

371 citations recorded by the source corpus.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/071269a80a6f48cc82b8c3917ce9e154ab39cb6b

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

In Finance

Citations in the corpus

Predictability in Financial Markets: What do Survey Expectations Tell Us? (2009, neutral): “Examples of this are Cecchetti, Lam, and Mark (2000) for the stock market and Gourinchas and Tornell (2004) for the foreign exchange market.”
Asset Pricing in Production Economies with Extrapolative Expectations (2015, background): “Cecchetti et al. (2000), Choi (2006), Lansing (2006), and Bansal and Shaliastovich (2010) study the effects of recency bias in an exchange economy.5 They show that extrapolative bias can help explain a high equity premium and high stock market volatility.”
Discounting with fat-tailed economic growth (2008, methodology): “Using an econometric estimation of this process on US data by Cecchetti et al. (2000), and assuming that we are currently in the good state, we obtained a term structure that goes from 4.”
Individual Risk Attitudes: New Evidence from a Large, Representative, Experimentally-Validated Survey (2005, neutral): “Evidence that the same factors determine risk attitudes across contexts would also lend support to the notion of a stable risk preference.”
ANTICIPATED UTILITY AND RATIONAL EXPECTATIONS AS APPROXIMATIONS OF BAYESIAN DECISION MAKING (2008, positive): “Here we assume that consumers are pessimistic, as in Cecchetti, Lam, and Mark (2000) and Abel (2002).”
Should Governments Use a Declining Discount Rate in Project Analysis? (2014, methodology): “…of the precautionary effect in equation (2) for distant time horizons.17 Various models of per capita consumption growth have been estimated for the United States (e.g., Cecchetti, Lam, and Mark 2000; Cochrane 1988) that could be used empirically to estimate a DDR using the extended Ramsey formula.”
YOLO: Mortality Beliefs and Household Finance Puzzles (2015, neutral): “These theories include excessive pessimism (optimism) over expansions (contractions) (Cecchetti et al. (2000)), low-probability or tail events (Rietz (1988)), and pessimism and doubt over the growth rate of consumption (Abel (2002)).”
Duration Dependence in Stock Prices (2004, neutral): “Cecchetti, Lam, and Mark (2000) introduced belief distortions that vary over expansions and contractions and lead to systematic predictability in returns, and Gordon and St-Amour (2000) presented a model in which preferences change according to an exogenous regime-switching process.”
Ambiguity, Learning, and Asset Returns (2009, methodology): “Cecchetti et al. (2000) apply Hamilton’s maximum likelihood method to estimate parameters in (13) using the annual per capita US consumption data covering the period 1890-1994.”
A Simple Framework for Analyzing Bull and Bear Markets (2001, background): “A first candidate might be Cecchetti et al (2000) who propose a model in which the endowment process (which we will describe as dividends) follows”
Do Investors Overweight Personal Experience? Evidence from IPO Subscriptions (2008, background): “Therefore, whether one personally invests in a stock or merely observes the performance of a stock should not matter.”