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Andrea Giusto
''Learning to Agree: A New Perspective on Price Drift.''
( 2015, Vol. 35 No.1 )
This paper introduces statistical learning in an asset pricing model of differences of opinions. I show that the model converges to the unique rational-expectation equilibrium and furthermore I show that asset prices drift predictably in its neighborhood. Accordingly, the model offers a unifying perspective between two so-far mutually exclusive strands of the asset pricing literature. Learning preserves all the desirable features offered by the rational-expectations hypothesis (i.e. the traders use efficiently both the private and the public information available) while yet implying asset prices that drift predictably in the ex-ante sense of Banerjee et al. (2009).
Keywords: heterogeneous beliefs, price drift, asset pricing.
E3 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
Manuscript Received : Jul 27 2014 Manuscript Accepted : Mar 11 2015

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