Download This Paper"Superstitious" Investors
62 Pages Posted: 4 Mar 2019 Last revised: 16 Jun 2024
Date Written: February 2019
Abstract
We consider an economy in which investors believe dividend growth is predictable, when in reality it is not. We show that these beliefs lead to excess volatility and return predictability. We also show that these beliefs are rational in the face of evidence on dividend growth. We apply this framework to explaining the value premium, predictability of bond returns, and the violation of uncovered interest rate parity.
Suggested Citation: Suggested Citation
Guo, Hongye and Wachter, Jessica A., "Superstitious" Investors (February 2019). NBER Working Paper No. w25603, Available at SSRN: https://ssrn.com/abstract=3346222
Jessica A. Wachter
University of Pennsylvania - Finance Department ( email )
The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
215-898-7634 (Phone)
215-898-6200 (Fax)
Do you have a job opening that you would like to promote on SSRN?
Feedback
Feedback to SSRN