We propose a model in which investors cannot costlessly process information from asset prices. At the trading stage, investors are boundedly rational and their interpretation of prices injects noise into the price system, which serves as a source of endogenous noise trading. Compared to the standard rational expectations equilibrium, our setup features price momentum and yields higher return vo...

In a market with short term investors, when noise is persistent, a liquidity shock affecting the aggregate demand at a given period propagates to future periods’ aggregate demands. As a consequence, asset prices reflect investors’ higher order expectations about both the fundamentals and the noise stock, worsening the “rational confusion” problem investors face when extracting information from ...

Mutual funds provide various facilities that make saving and investing simple, accessible, and affordable, by using professional management, diversification, variety of products, liquidity, affordability, convenience, and ease of record keeping. Moreover, strict government regulation and full disclosure of information makes the investments more secure in India. In Mutual fund market the key are...

Abstract The role of liquidity in the banking industry is increasingly under spotlight since Global Financial Crisis (GFC) 2007. Prior evidence offers contrasting findings on played by banks: whilst it ensures systemic financial stability, at same time raises agency costs. Notwithstanding this, European banks benefited from a generous injection following launch Quantitative Easing (QE) programm...

Dispersion in Options Investors’ Versus Analysts’ Expectations: Predictive Inference for Stock Returns

this research aims to understand mother’s and girl’s expectations from their spouses, and shows the difference between these two generation’s expectations. along this, by using qualitative approach and deep semi-structured interview, we studied the expectations difference among 14 mothers and 14 girls resided at tehran city’s fifth region (area).results from the research showed that women’s exp...

Investors' expectations can hamper a low-carbon transition

We develop a representative agent general equilibrium model with return extrapolation and recursive preferences. Our model is the first return extrapolation model that can be taken to the data in a serious way; it allows for detailed model calibration and direct comparisons with the leading rational expectations models of the stock market. The model matches investors’ extrapolative expectations...

Could the Federal Reserve have reversed the decline in the money supply during the Great Depression without causing a loss of confidence in the U.S. commitment to the gold standard? This article uses the $1 billion expansionary open market operation in 1932 as a crucial case study. Using forward exchange rates and interest rate differentials to measure devaluation expectations, we find virtuall...