US stock prices and recency-biased learning in the run-up to the Global Financial Crisis and its aftermath - Archive ouverte HAL
Article Dans Une Revue Journal of International Money and Finance Année : 2020

US stock prices and recency-biased learning in the run-up to the Global Financial Crisis and its aftermath

Pauline Gandré
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Résumé

This paper presents a consumption-based asset pricing model in which fluctuations in stock prices are driven by investors' time-varying subjective expectations about the dividend process. In line with the empirical literature, investors display recency bias when revising their beliefs about the actual dividend process and recursively discount the precision of past observations. Recency-biased learning significantly improves the ability of the standard model to replicate the boom-and-bust episode on the US S&P 500 stock market in the run-up to the Global Financial Crisis and its aftermath, along with features of subjective expectations of stock returns documented in survey data.

Dates et versions

hal-02479654 , version 1 (14-02-2020)

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Pauline Gandré. US stock prices and recency-biased learning in the run-up to the Global Financial Crisis and its aftermath. Journal of International Money and Finance, 2020, 104, ⟨10.1016/j.jimonfin.2020.102165⟩. ⟨hal-02479654⟩
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