دانلود رایگان مقاله رقابت زیبا، عقلانیت محدود، و گرایشات پویایی قیمت گذاری

Abstract

We present a dynamic asset pricing model that incorporates investor sentiment, bounded rationality and higher-order expectations to study how these factors affect asset pricing equilibrium. In the model, we utilize a two-period trading market and investors make decisions based on the heterogeneous expectations principle and the “sparsity-based bounded rational” sentiment. We find that bounded rationality results in mispricing and reduces it in next period. Investor sentiment produces more significant effects than private signals, optimistic investor sentiment increases hedging demand, thus causing prices to soar. Higher-order investors are more rational and attentive to the strategies of other participants rather than private signals. This model also derives the dampening effect of higher-order expectations to price volatility and the heterogeneity expectation depicts inconsistent investor behavior in financial markets. In the model, investors' expectations about future price is distorted by their sentiment and bounded rationality, so they obtain a biased mean from the signal extraction.

6. Conclusions

Many financial market anomalies are not well explained by traditional financial theory. The financial market is not always informa-tionally efficient, and rational arbitrage usually could not completely eliminate the irrational effects on asset prices. Numerous scholars have suggested that stock price is a combined result of higher-order expectations, investor sentiment, and some forms of bounded rationality. We examine this issue in a three-period market where investors are risk-averse, privately informed, heterogeneous expectations order, trade on private signal, make decisions by investor sentiment and sparsity-based bounded rationality jointly. Furthermore, as the extension to the dynamic setting which compared to the one-shot trading (static models such as Yang and Cai (2014)), investors often make multiple transactions in the real financial market, and determine current trading strategies while taking into account future trading opportunities. Moreover, the equilibrium prices result from multiperiod games among different types of investors; hence, we adopted the heterogeneous-order expectations dynamic model for investors. Then, in the first section of this paper, we propose a “sparsity-based” bounded rationality operator to depict bounded rationality by solving a two-term optimization with the first term: loss of imperfect decision, and the second term: cost of rationality (for details, see Yang and Liang (2016)). Summaries and conclusions for the characteristics of our model are described below.