Abstract

http://ssrn.com/abstract=891194
 
 

References (47)



 
 

Citations (20)



 


 



Price Drift as an Outcome of Differences in Higher Order Beliefs


Snehal Banerjee


Kellogg School of Management - Department of Finance

Ron Kaniel


University of Rochester - Simon Graduate School of Business; CEPR

Ilan Kremer


Independent

May 2008

AFA 2007 Chicago Meetings Paper
Review of Financial Studies, Forthcoming

Abstract:     
Motivated by the insight of Keynes (1936) on the importance of higher order beliefs in financial markets, we examine the role of such beliefs in generating drift in asset prices. We show that in a dynamic setting, a higher order difference of opinions is necessary for heterogeneous beliefs to generate price drift. Such drift does not arise in standard difference of opinion models, since investors' beliefs are assumed to be common knowledge. Our results stand in contrast to Allen, Morris and Shin (2006) and others, as we argue that in rational expectation equilibria, heterogeneous beliefs do not lead to price drift.

Number of Pages in PDF File: 25

Keywords: price drift, momentum, rational, difference, opinion

Accepted Paper Series


Download This Paper

Date posted: March 16, 2006 ; Last revised: November 30, 2009

Suggested Citation

Banerjee, Snehal and Kaniel, Ron and Kremer, Ilan, Price Drift as an Outcome of Differences in Higher Order Beliefs (May 2008). AFA 2007 Chicago Meetings Paper. Available at SSRN: http://ssrn.com/abstract=891194

Contact Information

Snehal Banerjee
Kellogg School of Management - Department of Finance ( email )
Evanston, IL 60208
United States
Ron Kaniel (Contact Author)
University of Rochester - Simon Graduate School of Business ( email )
Rochester, NY 14627
United States
HOME PAGE: http://rkaniel.simon.rochester.edu
CEPR ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Ilan Kremer
Independent
No Address Available
Feedback to SSRN


Paper statistics
Abstract Views: 1,428
Downloads: 348
Download Rank: 45,723
References:  47
Citations:  20

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.422 seconds