Dual decision processes and noise trading
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- dc.contributor.author Cerigioni, Francescoca
- dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
- dc.date.accessioned 2018-02-14T15:29:59Z
- dc.date.available 2018-02-14T15:29:59Z
- dc.date.issued 2016-09-14
- dc.date.modified 2017-07-23T02:18:21Z
- dc.description.abstract Evidence from nancial markets suggests that asset prices can be consistently far from their funda- mental value. Prices seem to underreact to news in the short-run and overreact in the long-run. In this paper, we use Dual Process Theory to describe traders behavior. In particular, a part of traders holds wrong beliefs anytime the market environment does not change suciently. The proportion of traders with wrong beliefs will depend on how similar past market environments are with the present one. We show that such model not only can be seen as a way of endogenizing noise trading, but also provides a justication for noise traders' beliefs and it shows that underreaction and overreaction naturally arise in such framework. Finally, we discuss how the model might help understanding the emergence of the equity-premium puzzle and its variation through time.
- dc.format.mimetype application/pdfca
- dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1553
- dc.identifier.citation
- dc.identifier.uri http://hdl.handle.net/10230/33882
- dc.language.iso eng
- dc.relation.ispartofseries Economics and Business Working Papers Series; 1553
- dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
- dc.rights.accessRights info:eu-repo/semantics/openAccess
- dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
- dc.subject.keyword asset pricing
- dc.subject.keyword dual processes
- dc.subject.keyword noise trading
- dc.subject.keyword underreaction
- dc.subject.keyword overreaction
- dc.subject.keyword equity-premium puzzle
- dc.subject.keyword Behavioral and Experimental Economics
- dc.title Dual decision processes and noise tradingca
- dc.title.alternative
- dc.type info:eu-repo/semantics/workingPaper