NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
loading...

Overconfidence, Information Diffusion, and Mispricing Persistence

Kent Daniel, Alexander Klos, Simon Rottke

NBER Working Paper No. 25346
Issued in December 2018
NBER Program(s):Asset Pricing

We propose a dynamic heterogeneous agents model which generates testable hypotheses about the formation, timing and bursting of asset price bubbles in the presence of short-sale constraints, given a calibration that is consistent with momentum and reversal effects for unconstrained assets. Consistent with the model, all short-sale constrained stocks earn strong negative risk-adjusted returns in the first year after portfolio formation. However, the calibrated model predicts strong differences in the mispricing persistence of past-winners and losers. After one year, the alpha of past-losers is approximately zero (0.23%/mo, t=0.85), while the alpha for past-winners is -0.75%/mo (t=-5.82) over the following four years.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Access to NBER Papers

You are eligible for a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w25346

 
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