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Article: Asset pricing with heterogeneous beliefs and relative performance

TitleAsset pricing with heterogeneous beliefs and relative performance
Authors
KeywordsHeterogeneous beliefs
Relative performance
Asset pricing
Fund managers
Issue Date2013
Citation
Journal of Banking and Finance, 2013, v. 37, n. 11, p. 4107-4119 How to Cite?
AbstractWe propose an equilibrium asset pricing model in which agents with heterogeneous beliefs care about relative performance. We find that the concern with relative performance leads agents to trade more similarly, a development that has two effects. First, similar trading directly decreases volatility. Second, similar trading decreases the impact of dominant agents. The second effect dominates the first when agents expect large differences between their final performances, and vice versa when agents expect small differences between their final performances. Compared with the case in which agents are unconcerned about relative performance, the stock return volatility is higher when the second effect dominates, and lower when the first effect dominates. This paper also demonstrates that the concern about relative performance influences investors' holdings, stock prices and risk premia. © 2013 Elsevier B.V.
Persistent Identifierhttp://hdl.handle.net/10722/213349
ISSN
2015 Impact Factor: 1.485
2015 SCImago Journal Rankings: 1.264

 

DC FieldValueLanguage
dc.contributor.authorHuang, Shiyang-
dc.contributor.authorQiu, Zhigang-
dc.contributor.authorShang, Qi-
dc.contributor.authorTang, Ke-
dc.date.accessioned2015-07-28T04:06:58Z-
dc.date.available2015-07-28T04:06:58Z-
dc.date.issued2013-
dc.identifier.citationJournal of Banking and Finance, 2013, v. 37, n. 11, p. 4107-4119-
dc.identifier.issn0378-4266-
dc.identifier.urihttp://hdl.handle.net/10722/213349-
dc.description.abstractWe propose an equilibrium asset pricing model in which agents with heterogeneous beliefs care about relative performance. We find that the concern with relative performance leads agents to trade more similarly, a development that has two effects. First, similar trading directly decreases volatility. Second, similar trading decreases the impact of dominant agents. The second effect dominates the first when agents expect large differences between their final performances, and vice versa when agents expect small differences between their final performances. Compared with the case in which agents are unconcerned about relative performance, the stock return volatility is higher when the second effect dominates, and lower when the first effect dominates. This paper also demonstrates that the concern about relative performance influences investors' holdings, stock prices and risk premia. © 2013 Elsevier B.V.-
dc.languageeng-
dc.relation.ispartofJournal of Banking and Finance-
dc.subjectHeterogeneous beliefs-
dc.subjectRelative performance-
dc.subjectAsset pricing-
dc.subjectFund managers-
dc.titleAsset pricing with heterogeneous beliefs and relative performance-
dc.typeArticle-
dc.description.natureLink_to_subscribed_fulltext-
dc.identifier.doi10.1016/j.jbankfin.2013.07.018-
dc.identifier.scopuseid_2-s2.0-84882778714-
dc.identifier.hkuros263262-
dc.identifier.hkuros263264-
dc.identifier.volume37-
dc.identifier.issue11-
dc.identifier.spage4107-
dc.identifier.epage4119-

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