Disagreement, Tastes, and Asset Prices

35 Pages Posted: 17 Nov 2005  

Eugene F. Fama

University of Chicago - Finance

Kenneth R. French

Tuck School of Business at Dartmouth; National Bureau of Economic Research (NBER)

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.

Suggested Citation

Fama, Eugene F. and French, Kenneth R., Disagreement, Tastes, and Asset Prices (November 2005). CRSP Working Paper No. 552; Tuck Business School Working Paper No. 2004-03. Available at SSRN: https://ssrn.com/abstract=502605 or http://dx.doi.org/10.2139/ssrn.502605

Eugene F. Fama (Contact Author)

University of Chicago - Finance ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-7282 (Phone)
773-702-9937 (Fax)

Kenneth R. French

Tuck School of Business at Dartmouth ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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