Toulouse School of Economics
21 Allee de Brienne
F-31015 Toulouse Cedex 6
Institutional Affiliation: Toulouse School of Economics
Information about this author at RePEc
NBER Working Papers and Publications
|February 2007||Optimal Beliefs, Asset Prices, and the Preference for Skewed Returns|
with Markus K. Brunnermeier, Jonathan A. Parker: w12940
Human beings want to believe that good outcomes in the future are more likely, but also want to make good decisions that increase average outcomes in the future. We consider a general equilibrium model with complete markets and show that when investors hold beliefs that optimally balance these two incentives, portfolio holdings and asset prices match six observed patterns: (i) because the cost of biased beliefs are typically second-order, investors typically hold biased assessments of probabilities and so are not perfectly diversified according to objective metrics; (ii) because the costs of biased beliefs temper these biases, the utility costs of the lack of diversification are limited; (iii) because there is a complementarity between believing a state more likely and purchasing more of ...
Published: Markus K. Brunnermeier & Christian Gollier & Jonathan A. Parker, 2007. "Optimal Beliefs, Asset Prices, and the Preference for Skewed Returns," American Economic Review, American Economic Association, vol. 97(2), pages 159-165, May. citation courtesy of
|April 2003||Collective Investment Decision Making with Heterogeneous Time Preferences|
with Richard Zeckhauser: w9629
We examine the investment decision problem of a group whose members have heterogeneous time preferences. In particular, they have different discount factors for utility, possibly not exponential. We characterize the properties of efficient allocations of resources and of shadow prices that would decentralize such allocations. We show in particular that the term structure of interest rates is decreasing when all members have DARA preferences. Heterogeneous groups should not use exponential discounting for their collective investment decisions even if all agents discount exponentially. We also exhibit conditions that lead the representative agent to have a rate of impatience that decreases with GDP per capita.
|October 1997||Horizon Length and Portfolio Risk|
with Richard J. Zeckhauser: t0216
In this paper, we compare the attitude towards current risk of two expected-utility-maximizing investors that are identical except that the first investor will live longer than the" second one. In one of the models under consideration, there are two assets at every period. The" first asset has a zero sure return, whereas the second asset is risky without serial correlation of" yields. It is often suggested that the young investor should purchase more of the risky asset than" the old investor in such circumstances. We show that a necessary and sufficient condition to get" this property is that the Arrow-Pratt index of absolute tolerance (Tu) be convex. If we allow for a" positive risk-free rate, the necessary and sufficient condition is Tu convex extends the well-known result that inve...
Published: Gollier, Christian and Richard J. Zeckhauser. "Horizon Length And Portfolio Risk," Journal of Risk and Uncertainty, 2002, v24(3,May), 195-212.