European Parliament Library

Asset Mispricing Due to Cognitive Dissonance, Bernhard Eckwert, Burkhard Drees

Contributor
Abstract
The behavior of equity prices is analyzed in a general equilibrium model where agents have preferences not only over consumption but also (implicitly) over their beliefs. To alleviate cognitive dissonance, investors endogenously choose to ignore information that conflicts too much with their ex ante expectations. Depending on the new information that is released, systematic overvaluation and undervaluation of equity prices arise, as well as too much and too little equity price volatility. The distortion in the asset pricing process is closely related to the precision of the information
Table Of Contents
""Contents""; ""I. INTRODUCTION""; ""II. THE ASSET PRICING MODEL""; ""III. ASSET PRICING WITH COGNITIVE DISSONANCE""; ""IV. HOW INFORMATION AFFECTS ASSET PRICES""; ""V. THE LESS INFORMATIVE THE SIGNAL, THE LARGER THE MISPRICING""; ""VI. CONCLUDING REMARKS""; ""References""
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (31 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9781452732015

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