Higher Risk Aversion in Older Agents: Its Asset Pricing Implications

DaSilva, Amadeu; Giannikos, Christos I.

doi:10.2139/ssrn.955958

Cited by 13 publications

(8 citation statements)

References 20 publications

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“…With the exception of the habit persistence parameters, the calibration of the model is similar to the one of Constantinides et al (2002) and DaSilva and Giannikos (2004). 9 As such, here we limit our discussion and provide a summary of the key calibration parameters.…”

Section: Calibrationmentioning

confidence: 99%

“…For excellent surveys on equity premium and risk-free rate puzzles see Cochrane and Hansen (1992) and Kocherlacota (1996). 2 See, for example, Mehra and Prescott (1988), Reitz (1988), Abel (1990), Constantinides (1990), Ferson and Constantinides (1991), He and Modest (1995), Constantinides and Duffie (1996), Detemple and Giannikos (1996), Heaton and Lucas (1997), Hindy and Zhu (1997), Campbell and Cochrane (1999), Zhou (1999), Constantinides et al (2002), Danthine et al (2004), Gordon and St-Amour (2004), DaSilva and Giannikos (2004), Storesletten et al (2007), Donaldson and Giannikos (2009) and Giannikos and Shi (2009). discount rate, and the intensity of non-addictive habit formation validated by previous studies. Giannikos and Shi (2009) present evidence that model specifications with both durability and habit persistence are able to match the high level of equity premium observed in the US data.…”

Section: Introductionmentioning

confidence: 99%

“…(2002), Danthine et al . (2004), Gordon and St‐Amour (2004), DaSilva and Giannikos (2004), Storesletten et al . (2007), Donaldson and Giannikos (2009) and Giannikos and Shi (2009).…”

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confidence: 99%

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Habit Formation in an Overlapping Generations Model with Borrowing Constraints

DaSilva

Farka

Giannikos

2009

European Financial Management

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We introduce habit-formation in the three-period OLG borrowing-constrained framework of Constantinides et al. (2002) by allowing the utility of the middleaged (old) to depend on consumption when young (middle-aged). This specification enables us to separate the effect of the two habit parameters (middle-aged and old) since each representative age-group can face different levels of habit persistence. The two-habit setup underlines some important issues with regards to savings and security returns which do not always conform to the standard findings in the literature. In addition, the model produces equity premium consistent with US data for relatively small levels of risk aversion.We are grateful to John Donaldson for numerous comments and suggestions during the course of this research. We are especially thankful to the editor, John Doukas, and George Constantinides, the referee, for their various helpful comments and suggestions. Finally we also want to thank Richard Clarida, Dan O'Flaherty, Rajnish Mehra, Bruce Preston, Stijn Van Nieuwerburgh, and conference participants of the 2005 Financial Management Association.

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Section: Calibrationmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Habit Formation in an Overlapping Generations Model with Borrowing Constraints

DaSilva

Farka

Giannikos

2009

European Financial Management

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“…In fact, there is evidence that investors' behavior with regard to information depends on socio-economic and psychological characteristics. Investor behavior may vary according to age (DaSilva & Giannikos, 2004), occupation (Christiansen, Joensenand, & Rangvid,, 2008) or the environment in which they live (Goetzmann & Kumar, 2008). Peress (2004) shows that wealthier investors value information more and poor investors trade little even with very precise information.…”

Section: Introductionmentioning

confidence: 99%

Information, overconfidence and trading: Do the sources of information matter?

Abreu

Mendes

2012

Journal of Economic Psychology

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JEL classification: G11 G14 D83PsycINFO classification: 3040 3920 Keywords: Information OverconfidenceInvestor behavior Trading Sources of information a b s t r a c tWe investigate how the strength of the positive association between frequency of trading and information acquisition is dependent on the sources of information used by investors and on investors' overconfidence. We add to the existing literature by investigating if the positive relationship between investment in information and intensity of trading in financial assets is sensitive to the sources of information used by investors, and if this influence is different for overconfident and non-overconfident investors.Our results confirm the classical statement that the more frequently individual investors invest in information, the more they trade in financial products. They also confirm behavioral finance findings that overconfident investors, who show a better than average bias, trade more frequently. Our findings are novel showing that the more overconfident and non-overconfident investors invest in information the more they trade, but the trading behavior is sensitive to the sources of information used. Overconfident investors trade less frequently when they collect information via friends and family, and non-overconfident investors trade more frequently when they use specialized sources of information.

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“…2 appear in the 66 Bear in mind, however, that the returns reported for this construct are annualized 20-year returns. 67 Da Silva and Giannikos (2006) explore the same construct where the CRRA of the old agent is greater than the corresponding value for the middle agent.…”

Section: Attributementioning

confidence: 99%

Risk Based Explanations of the Equity Premium

Donaldson

Mehra

2007

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This essay reviews the family of models that seek to provide aggregate risk based explanations for the empirically observed equity premium. Theories based on non-expected utility preference structures, limited financial market participation, model uncertainty and the small probability of enormous losses are detailed. We impose the additional requirements that candidate models yield consistent inter temporal portfolio choice and that a representative agent can be constructed which is independent of the underlying heterogeneous economy's initial wealth distribution. While many models are able to replicate a wide variety of financial statistics including the premium, few satisfy these latter criteria as well.

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Higher Risk Aversion in Older Agents: Its Asset Pricing Implications

Cited by 13 publications

References 20 publications

Habit Formation in an Overlapping Generations Model with Borrowing Constraints

Habit Formation in an Overlapping Generations Model with Borrowing Constraints

Information, overconfidence and trading: Do the sources of information matter?

Risk Based Explanations of the Equity Premium

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