Learning about Risk and Return: A Simple Model of Bubbles and Crashes
| dc.contributor.author | Branch, William A. | |
| dc.contributor.author | Evans, George W., 1949- | |
| dc.date.accessioned | 2008-03-20T16:40:42Z | |
| dc.date.available | 2008-03-20T16:40:42Z | |
| dc.date.issued | 2008-01-31 | |
| dc.description | 42 p. | en |
| dc.description.abstract | This paper demonstrates that an asset pricing model with least-squares learning can lead to bubbles and crashes as endogenous responses to the fundamentals driving asset prices. When agents are risk-averse they generate forecasts of the conditional variance of a stock’s return. Recursive updating of the conditional variance and expected return implies two mechanisms through which learning impacts stock prices: occasional shocks may lead agents to lower their risk estimate and increase their expected return, thereby triggering a bubble; along a bubble path recursive estimates of risk will increase and crash the bubble. | en |
| dc.format.extent | 3742112 bytes | |
| dc.format.mimetype | application/pdf | |
| dc.identifier.uri | https://hdl.handle.net/1794/5776 | |
| dc.language.iso | en_US | en |
| dc.publisher | University of Oregon, Dept of Economics | en |
| dc.relation.ispartofseries | University of Oregon Economics Department Working Papers ; 2008-1 | en |
| dc.subject | Risk | en |
| dc.subject | Asset pricing | en |
| dc.subject | Bubbles | en |
| dc.subject | Adaptive learning | en |
| dc.subject | Stocks -- Prices | en |
| dc.title | Learning about Risk and Return: A Simple Model of Bubbles and Crashes | en |
| dc.type | Working Paper | en |