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Learning to Agree: A New Perspective on Price Drift

Author

Listed:
  • Andrea Giusto

    (Dalhousie University)

Abstract
This paper introduces statistical learning in an asset pricing model of differences of opinions. I show that the model converges to the unique rational-expectation equilibrium and furthermore I show that asset prices drift predictably in its neighborhood. Accordingly, the model offers a unifying perspective between two so-far mutually exclusive strands of the asset pricing literature. Learning preserves all the desirable features offered by the rational-expectations hypothesis (i.e. the traders use efficiently both the private and the public information available) while yet implying asset prices that drift predictably in the ex-ante sense of Banerjee et al. (2009).

Suggested Citation

  • Andrea Giusto, 2015. "Learning to Agree: A New Perspective on Price Drift," Economics Bulletin, AccessEcon, vol. 35(1), pages 276-282.
    • Handle: RePEc:ebl:ecbull:eb-14-00647
    as

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    References listed on IDEAS

    as
    1. Pascal J. Maenhout, 2004. "Robust Portfolio Rules and Asset Pricing," The Review of Financial Studies, Society for Financial Studies, vol. 17(4), pages 951-983.
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    More about this item

    Keywords

    heterogeneous beliefs; price drift; asset pricing.;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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