NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

An Exploration of the Effects of Pessimism and Doubt on Asset Returns

Andrew B. Abel

NBER Working Paper No. 8132
Issued in February 2001
NBER Program(s):   AP

The subjective distribution of growth rates of aggregate consumption is characterized by pessimism if it is first-order stochastically dominated by the objective distribution. Uniform pessimism is a leftward translation of the objective distribution of the logarithm of the growth rate. The subjective distribution is characterized by doubt if it is mean-preserving spread of the objective distribution. Pessimism and doubt both reduce the riskfree rate and thus can help resolve the riskfree rate puzzle. Uniform pessimism and doubt both increase the average equity premium and thus can help resolve the equity premium puzzle.

download in pdf format
   (214 K)

email paper

This paper is available as PDF (214 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w8132

Published: Abel, Andrew B., 2002. "An exploration of the effects of pessimism and doubt on asset returns," Journal of Economic Dynamics and Control, Elsevier, vol. 26(7-8), pages 1075-1092, July. citation courtesy of

Users who downloaded this paper also downloaded these:
Becker A Theory of Marriage
Bachmann and Elstner w18989 Firms’ Optimism and Pessimism
Reinhart and Rogoff w15639 Growth in a Time of Debt
Bekaert and Wu w6022 Asymmetric Volatility and Risk in Equity Markets
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

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

Contact Us