Replication data for: Stock Price Booms and Expected Capital Gains

Principal Investigator(s): View help for Principal Investigator(s) Klaus Adam; Albert Marcet; Johannes Beutel

Name	File Type	Size	Last Modified
Table-1a			10/12/2019 02:04:AM
Table-1b1c			10/12/2019 02:04:AM
ABM-solution-code.zip	application/zip	112.3 MB	10/11/2019 10:04:PM
Data-read-me.pdf	application/pdf	36.2 KB	10/11/2019 10:04:PM
Data-read-me.tex	text/x-tex	4.4 KB	10/11/2019 10:04:PM
Documentation-MatLab-Code.pdf	application/pdf	155.9 KB	10/11/2019 10:04:PM
data_oct2014.xlsx	application/vnd.openxmlformats-officedocument.spreadsheetml.sheet	51.8 KB	10/11/2019 10:04:PM

Project Description

Summary: Investors' subjective capital gains expectations are a key element explaining stock price fluctuations. Survey measures of these expectations display excessive optimism (pessimism) at market peaks (troughs). We formally reject the hypothesis that this is compatible with rational expectations. We then incorporate subjective price beliefs with such properties into a standard asset-pricing model with rational agents (internal rationality). The model gives rise to boom-bust cycles that temporarily delink stock prices from fundamentals and quantitatively replicates many asset-pricing moments. In particular, it matches the observed strong positive correlation between the price dividend ratio and survey return expectations, which cannot be matched by rational expectations.

Scope of Project

JEL Classification:
      D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
      D84 Expectations; Speculations
      G12 Asset Pricing; Trading Volume; Bond Interest Rates
      G14 Information and Market Efficiency; Event Studies; Insider Trading

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Published Versions

V1 [2019-10-12]

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