NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Salience and Asset Prices

Pedro Bordalo, Nicola Gennaioli, Andrei Shleifer

NBER Working Paper No. 18708
Issued in January 2013
NBER Program(s):   AP

We present a simple model of asset pricing in which payoff salience drives investors' demand for risky assets. The key implication is that extreme payoffs receive disproportionate weight in the market valuation of assets. The model accounts for several puzzles in finance in an intuitive way, including preference for assets with a chance of very high payoffs, an aggregate equity premium, and countercyclical variation in stock market returns.

download in pdf format
   (212 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w18708

Published: Pedro Bordalo & Nicola Gennaioli & Andrei Shleifer, 2013. "Salience and Asset Prices," American Economic Review, American Economic Association, vol. 103(3), pages 623-28, May. citation courtesy of

Users who downloaded this paper also downloaded these:
Greenwood and Shleifer w18686 Expectations of Returns and Expected Returns
Bordalo, Gennaioli, and Shleifer w17947 Salience and Consumer Choice
Bordalo, Gennaioli, and Shleifer w16387 Salience Theory of Choice Under Risk
Barberis w18621 Thirty Years of Prospect Theory in Economics: A Review and Assessment
Bordalo, Gennaioli, and Shleifer w17761 Salience in Experimental Tests of the Endowment Effect
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us