Investor Naïveté and Asset Prices
نویسنده
چکیده
This paper describes strategic behavior in a nonequilibrium model of asset pricing with heterogeneous sophistication. Both risk and return are increasing in the naïveté of investors in the market. Optimal investment involves considering the effect that naïve investors have on the market. Further, we derive a simple characterization of the asset price dynamics that results from an arbitrary combination of a countably infinite set of investor types.
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