Shefrin - Behavioral & Neoclassical asset pricing theories - 2008

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How Different are Returns to a Behavioural MV-Portfolio From Neoclassical Counterpart? 110% Gross Return to Mean-variance Portfolio: Behavioral Mean-Variance Return vs Efficient Mean-Variance Return 105% 100% Mean-variance Return 95% 90% 85% Neoclassical Efficient MV Portfolio Return Behavioral MV Portfolio Return 80% 75% 96% 97% 99% 101% 103% 104% 106% Consumption Growth Rate g (Gross) Copyright Hersh Shefrin 2008 45
MV Function ∼ Quadratic 2-factor Model, Mkt and Mkt 2 Gross Return to Mean-variance Portfolio: Behavioral Mean-Variance Return vs Efficient Mean-Variance Return 1.03 1.02 Efficient MV Portfolio Return 1.01 Mean-variance Return 1 0.99 0.98 0.97 Behavioral MV Portfolio Return Return to a Combination of the Market Portfolio and Risk-free Security 0.96 0.95 95.82% 96.64% 97.48% 98.31% 99.16% 100.01% 100.87% 101.74% 102.61% 103.49% 104.38% 105.28% 106.19% Consumption Growth Rate g (Gross) Copyright Hersh Shefrin 2008 46
Page 1 and 2: Behavioural and Neoclassical Asset
Page 3 and 4: Neoclassical Asset Pricing Theory
Page 5 and 6: Weaknesses in Behavioural Asset Pri
Page 7 and 8: BAAP 2e The rest of my talk will d
Page 9 and 10: Heterogeneity is Behavioural Challe
Page 11 and 12: Representative Investor Models Man
Page 13 and 14: Simple Example of T14.1 Errors in F
Page 15 and 16: Defining Sentiment Intuitively In
Page 17 and 18: Formally Defining Sentiment Λ Gene
Page 19 and 20: When is Sentiment = 0? Consider th
Page 21 and 22: 106.19% 105.82% 105.46% Shape of Se
Page 23 and 24: 106.19% 105.82% 105.46% 105.10% 104
Page 25 and 26: Mistakes About 2 nd Moments Suppos
Page 27 and 28: 106.19% Mix of Underconfident Pessi
Page 29 and 30: Histogram Return Expectations Decem
Page 31 and 32: Pricing Kernel (SDF) Stochastic di
Page 33 and 34: 106.19% 105.82% 105.46% 105.10% 104
Page 35 and 36: Fundamental Theorem for U-shaped Ca
Page 37 and 38: Market Prices Reflect Both Fundamen
Page 39 and 40: Aït-Sahalia - Lo’s SDF Estimate
Page 41 and 42: Dittmar (2002) Human Capital Copyri
Page 43 and 44: Barone Adesi- Engle-Mancini (2008)
Page 45: Relationship Between SDF and Mean-V
Page 49 and 50: Oscillating SDF The general oscil
Page 51 and 52: Additional Explanatory Power CA
Page 53 and 54: My prediction is that asset pricing
Page 55 and 56: SP/A Focuses on Hope and Fear Affec
Page 57 and 58: SP/A “Sentiment” with Aspiratio
Page 59: Summary Comprehensive SDF-based

Shefrin - Behavioral & Neoclassical asset pricing theories - 2008

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