Disagreement, Tastes, and Asset Prices
35 Pages Posted: 17 Nov 2005
Date Written: November 2005
Abstract
Standard asset pricing models assume that (i) there is complete agreement among investors about probability distributions of future payoffs on assets, and (ii) investors choose asset holdings based solely on anticipated payoffs; that is, investment assets are not also consumption goods. Both assumptions are unrealistic. We provide a simple framework for studying how disagreement and tastes for assets as consumption goods can affect asset prices.
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