Behavioral Approach to Asset Pricing (eBook)

Hersh Shefrin (Autor)

eBook Download: PDF

2005 | 1. Auflage
496 Seiten
Elsevier Science (Verlag)
978-0-08-047603-2 (ISBN)

Infos

A Behavioral Approach to Asset Pricing Theory examines the reigning assumptions of asset pricing theory and reconstructs them to incorporate findings from behavioral finance. It constructs a solid, intact structure that challenges classic assumptions and at the same time provides a strong theory and efficient empirical tools.

Building on the models developed by both traditional asset pricing theorists and behavioral asset pricing theorists, this book takes the discussion to the next step. The author provides a general behaviorally based intertemporal treatment of asset pricing theory that extends to the discussion of derivatives, fixed income securities, mean-variance efficient portfolios, and the market portfolio.

The book develops a series of examples to illustrate the theoretical results. The CD-ROM contains most of the examples, worked out as Excel spreadsheets, so that a diligent reader can follow them through.
Instructors might also want to use the examples to assign class exercises, asking students to modify the numbers and see what happens.

* The first book to focus completely on how behavioral finance principles affect asset pricing
* Hersh Shefrin is a recognized expert in behavioral finance
* Behavioral finance is a growth area in finance scholarship and moving more and more into practice

Inhalt

Cover 1
Contents 6
1 Introduction 26
1.1 Why Read This Book? 27
1.2 Organization: How the Ideas in This Book Tie Together 31
1.3 Summary 37
Part I - Heuristics and Representativeness: Experimental Evidence 38
2 Representativeness and Bayes Rule: Psychological Perspective 40
2.1 Explaining Representativeness 41
2.2 Implications for Bayes Rule 41
2.3 Experiment 41
2.4 Representativeness and Prediction 44
2.5 Summary 48
3 Representativeness and Bayes Rule: Economics Perspective 50
3.1 The Grether Experiment 50
3.2 Representativeness 53
3.3 Results 53
3.4 Summary 57
4 A Simple Asset Pricing Model Featuring Representativeness 58
4.1 First Stage, Modified Experimental Structure 59
4.2 Expected Utility Model 59
4.3 Equilibrium Prices 62
4.4 Representativeness 63
4.5 Second Stage: Signal-Based Market Structure 64
4.6 Summary 66
5 Heterogeneous Judgments in Experiments 68
5.1 Grether Experiment 68
5.2 Heterogeneity in Predictions of GPA 69
5.3 The De Bondt Experiment 71
5.4 Why Some Bet on Trends and Others Commit Gambler’s Fallacy 80
5.5 Summary 82
Part II - Heuristics and Representativeness: Investor Expectations 84
6 Representativeness and Heterogeneous Beliefs Among Individual Investors, Financial Executives, and Academics 86
6.1 Individual Investors 86
6.2 The Expectations of Academic Economists 94
6.3 Financial Executives 98
6.4 Summary 99
7 Representativeness and Heterogeneity in the Judgments of Professional Investors 100
7.1 Contrasting Predictions: How Valid? 100
7.2 Update to Livingston Survey 101
7.3 Individual Forecasting Records 105
7.4 Gambler’s Fallacy 113
7.5 Why Heterogeneity Is Time Varying 118
7.6 Summary 119
Part III - Developing Behavioral Asset Pricing Models 122
8 A Simple Asset Pricing Model with Heterogeneous Beliefs 124
8.1 A Simple Model with Two Investors 124
8.2 Equilibrium Prices 127
8.3 Fixed Optimism and Pessimism 129
8.4 Incorporating Representativeness 132
8.5 Summary 134
9 Heterogeneous Beliefs and Inefficient Markets 136
9.1 Defining Market Efficiency 136
9.2 Market Efficiency and Logarithmic Utility 140
9.3 Equilibrium Prices as Aggregators 141
9.4 Market Efficiency: Necessary and Sufficient Condition 142
9.5 Interpreting the Efficiency Condition 144
9.6 Summary 147
10 A Simple Market Model of Prices and Trading Volume 148
10.1 The Model 148
10.2 Analysis of Returns 151
10.3 Analysis of Trading Volume 152
10.4 Example 156
10.5 Arbitrage 164
10.6 Summary 165
11 Efficiency and Entropy: Long-Run Dynamics 166
11.1 Introductory Example 167
11.2 Entropy 172
11.3 Numerical Illustration 173
11.4 Markov Beliefs 174
11.5 Heterogeneous Time Preference, Entropy, and Efficiency 175
11.6 Entropy and Market Efficiency 179
11.7 Summary 182
Part IV - Heterogeneity in Risk Tolerance and Time Discounting 184
12 CRRA and CARA Utility Functions 186
12.1 Arrow–Pratt Measure 186
12.2 Proportional Risk 187
12.3 Constant Relative Risk Aversion 187
12.4 Logarithmic Utility 189
12.5 CRRA Demand Function 190
12.6 Representative Investor 191
12.7 Example 192
12.8 CARA Utility 195
12.9 Summary 199
13 Heterogeneous Risk Tolerance and Time Preference 200
13.1 Survey Evidence 200
13.2 Extended Survey 204
13.3 Time Preference 207
13.4 Summary 208
14 Representative Investors in a Heterogeneous CRRA Model 210
14.1 Relationship to Representative Investor Literature 211
14.2 Modeling Preliminaries 214
14.3 Efficient Prices 215
14.4 Representative Investor Characterization Theorem 216
14.5 Comparison Example 220
14.6 Pitfall: The Representative Investor Theorem Is False 223
14.7 Summary 225
Part V - Sentiment and Behavioral SDF 226
15 Sentiment 228
15.1 Intuition: Kahneman’s Perspective 228
15.2 Sentiment 231
15.3 Example Featuring Heterogeneous Risk Tolerance 232
15.4 Example Featuring Log-Utility 234
15.5 Sentiment as a Stochastic Process 243
15.6 Summary 244
16 Behavioral SDF and the Sentiment Premium 246
16.1 The SDF 247
16.2 Sentiment and the SDF 248
16.3 Pitfalls 251
16.4 Sentiment and Expected Returns 255
16.5 Entropy and Long-Run Efficiency 259
16.6 Learning: Bayesian and Non-Bayesian 261
16.7 Summary 262
Part VI - Applications of Behavioral SDF 264
17 Behavioral Betas and Mean-Variance Portfolios 266
17.1 Mean-Variance Efficiency and Market Efficiency 266
17.2 Characterizing Mean-variance Efficient Portfolios 267
17.3 The Shape of Mean-Variance Returns 269
17.4 The Market Portfolio 272
17.5 Behavioral Beta: Decomposition Result 274
17.6 Summary 278
18 Cross-section of Return Expectations 280
18.1 Literature Review 281
18.2 Factor Models and Risk 286
18.3 Differentiating Fundamental Risk and Investor Error 287
18.4 Implications for the Broad Debate 292
18.5 Analysts’ Return Expectations 293
18.6 How Consciously Aware Are Investors When Forming Judgments? 294
18.7 How Reliable Is the Evidence on Expected Returns? 295
18.8 Alternative Theories 297
18.9 Summary 302
19 Testing for a Sentiment Premium 304
19.1 Diether–Malloy–Scherbina: Returns Are Negatively Related to Dispersion 305
19.2 Ghysels–Juergens: Dispersion Factor 307
19.3 Estimating a Structural SDF-Based Model 311
19.4 Summary 313
20 A Behavioral Approach to the Term Structure of Interest Rates 314
20.1 The Term Structure of Interest Rates 314
20.2 Pitfall: The Bond Pricing Equation in Theorem 20.1 Is False 315
20.3 Volatility 317
20.4 Expectations Hypothesis 321
20.5 Summary 324
21 Behavioral Black–Scholes 326
21.1 Call and Put Options 326
21.2 Risk-Neutral Densities and Option Pricing 327
21.3 Option Pricing Examples 330
21.4 Smile Patterns 336
21.5 Heterogeneous Risk Tolerance 341
21.6 Pitfall: Equation (21.12) Is False 342
21.7 Pitfall: Beliefs Do Not Matter in Black – Scholes 343
21.8 Summary 344
22 Irrational Exuberance and Option Smiles 346
22.1 Irrational Exuberance: Brief History 347
22.2 Risk-Neutral Densities and Index Option Prices 351
22.3 Continuation, Reversal, and Option Prices 355
22.4 Price Pressure: Was Arbitrage Fully Carried Out? 360
22.5 Heterogeneous Beliefs 362
22.6 Summary 362
23 Empirical Evidence in Support of Behavioral SDF 364
23.1 Bollen–Whaley: Price Pressure Drives Smiles 365
23.2 Han: Smile Effects, Sentiment, and Gambler’s Fallacy 369
23.3 David–Veronesi: Gambler’s Fallacy and Negative Skewness 371
23.4 Jackwerth: Estimating Market Risk Aversion 373
23.5 Rosenberg–Engle: Signature of Sentiment in the SDF 375
23.6 Comparing the Behavioral SDF and Empirical SDF 377
23.7 Heterogeneous Perspectives 384
23.8 Summary 387
Part VII - Prospect Theory 388
24 Prospect Theory: Introduction 390
24.1 Experimental Evidence 391
24.2 Theory 399
24.3 Subtle Aspects Associated with Risk Aversion 404
24.4 Generalized Utility Theories 406
24.5 Summary 407
25 Behavioral Portfolios 408
25.1 Theory 409
25.2 Prospect Theory: Indi.erence Map 410
25.3 Portfolio Choice: Single Mental Account 411
25.4 Multiple Mental Accounts: Example 414
25.5 SP/A Theory 417
25.6 Real World Portfolios and Securities 423
25.7 Summary 425
26 Prospect Theory Equilibrium 426
26.1 The Model 427
26.2 Simple Example 428
26.3 On the Boundary 432
26.4 Equilibrium Pricing 433
26.5 Portfolio Insurance 435
26.6 Risk and Return: Portfolio Insurance in a Mean-Variance Example 438
26.7 Summary 442
27 Pricing and Prospect Theory: Empirical Studies 444
27.1 Combining Behavioral Preferences and Beliefs 444
27.2 Disposition Effect: The Empirical Evidence 445
27.3 Investor Beliefs 447
27.4 Momentum and the Disposition Effect 451
27.5 Summary 453
28 Reflections on the Equity Premium Puzzle 454
28.1 Basis for Puzzles in Traditional Framework 454
28.2 Erroneous Beliefs 458
28.3 Alternative Rationality-Based Models 462
28.4 Behavioral Preferences and the Equity Premium 465
28.5 Risks, Small and Large 469
28.6 Summary 470
Part VIII - Closure 472
29 Conclusion 474
29.1 Recapitulating the Main Points 474
29.2 Testable Predictions 477
29.3 Future Directions 478
References 482
Index 498

Produkt-Details

• Erscheint lt. Verlag: 3.2.2005
• Sprache: englisch
• Themenwelt: Sachbuch/Ratgeber ► Beruf / Finanzen / Recht / Wirtschaft ► Geld / Bank / Börse
• Themenwelt: Mathematik / Informatik ► Mathematik
• Themenwelt: Recht / Steuern ► Wirtschaftsrecht
• Themenwelt: Wirtschaft ► Allgemeines / Lexika
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Finanzierung
• Themenwelt: Betriebswirtschaft / Management ► Spezielle Betriebswirtschaftslehre ► Bankbetriebslehre
• Themenwelt: Wirtschaft ► Volkswirtschaftslehre
• ISBN-10: 0-08-047603-1 / 0080476031
• ISBN-13: 978-0-08-047603-2 / 9780080476032