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Theoretical asset pricing under behavioral decision making
de Vries,Martijn A.
de Vries,Martijn A.
Abstract
This dissertation is a collection of chapters that analyze the role of non-standard beliefs and preferences in investor behavior and thereby for financial markets. The first chapter sheds light on the role of non-standard preferences for an ongoing debate on the slope of the term structure of equity risk premia. More specifically, the finding that individuals may act in a risk seeing way, and may not always be risk averse, helps to explain the empirical findings in the literature. The second chapter gives a general theoretical result about learning the distribution of a random variable under limited attention. The main result is that limited attention gives rise to some familiar biases in behavioral finance or implies similar behavior as: a preference for positive skewness, overestimation of volatility, overextrapolative beliefs and probability weighting. The third chapter provides a new empirical finding, namely that the trading volume in the first three years after an IPO is u-shaped. Subsequently, the analysis shows that this new finding can be explained by a model with speculative investors and ambiguity averse investors and thereby also illustrates the importance of ambiguity in finance.
Description
Date
2022
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Publisher
Tilburg University
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Citation
de Vries, M A 2022, 'Theoretical asset pricing under behavioral decision making', Doctor of Philosophy, Tilburg. https://doi.org/10.26116/center-lis-2204
License
info:eu-repo/semantics/openAccess