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http://ssrn.com/abstract=414080
 
 

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Asset Price Anomalies Under Bounded Rationality


Emilio Barucci


University of Pisa - Department of Economics

Roberto Monte


University of Rome Tor Vergata - Dipartimento di Studi Economici, Finanziari e Metodi quantitativi (SEFEMEQ)

Roberto Renò


University of Siena - Department of Economics and Statistics

June 2003

CEIS Tor Vergata Research Paper Series No. 19

Abstract:     
We analyze the classical asset pricing model assuming non fully rational agents. Agents forecast future prices cum dividend through an adaptive learning rule. This assumption provides an explanation of some anomalies encountered in the empirical analysis of asset prices under full rationality: Returns are serially correlated (positively over a short horizon and negatively over a longer horizon) and the dividend yield predicts future returns (positive correlation). Considering the continuous time limit process, the same regularities are established analytically for price increments.

Number of Pages in PDF File: 22

Keywords: Asset Prices, Returns correlation, Bounded Rationality, Dividends, Diffusion Processes

JEL Classification: C61, C62, D83, D84, E32

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Date posted: June 6, 2003  

Suggested Citation

Barucci, Emilio and Monte, Roberto and Renò, Roberto, Asset Price Anomalies Under Bounded Rationality (June 2003). CEIS Tor Vergata Research Paper Series No. 19. Available at SSRN: http://ssrn.com/abstract=414080 or http://dx.doi.org/10.2139/ssrn.414080

Contact Information

Emilio Barucci (Contact Author)
University of Pisa - Department of Economics ( email )
via Ridolfi 10
I-56100 Pisa, PI 56100
Italy
Roberto Monte
University of Rome Tor Vergata - Dipartimento di Studi Economici, Finanziari e Metodi quantitativi (SEFEMEQ) ( email )
Via Columbia n.2
Roma, 00133
Italy
Roberto Renò
University of Siena - Department of Economics and Statistics ( email )
Piazza S. Francesco, 7
Siena, I-53100
Italy
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