Shefrin - Behavioral & Neoclassical asset pricing theories - 2008

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SP/A Theory & Prospect Theory SP/A theory is more tractable to use in respect to asset pricing theory. SP/A theory provides a more parsimonious framework for understanding the psychology of risk. SP/A theory consistent with neuro-anatomy. SP/A theory explains behaviour that prospect theory cannot explain. Copyright Hersh Shefrin 2008 53
SP/A Focuses on Hope and Fear Affect-based Representation Sentiment Function 0.25 0.2 0.15 Fear Hope (anterior insula) (nucleus accumbens) 0.1 0.05 0 106.19% 95.82% 96.15% 96.48% 96.81% 97.14% 97.48% 97.81% 98.15% 98.48% 98.82% 99.16% 99.50% 99.84% 100.18% 100.53% 100.87% 101.22% 101.56% 101.91% 102.26% 102.61% 102.96% 103.32% 103.67% 104.03% 104.38% 104.74% 105.10% 105.46% 105.82% -0.05 Consumption Growth Rate g (Gross) 54 Copyright Hersh Shefrin 2008
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 and 46: Relationship Between SDF and Mean-V
Page 47 and 48: MV Function ∼ Quadratic 2-factor
Page 49 and 50: Oscillating SDF The general oscil
Page 51 and 52: Additional Explanatory Power CA
Page 53: My prediction is that asset pricing
Page 57 and 58: SP/A “Sentiment” with Aspiratio
Page 59: Summary Comprehensive SDF-based
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Shefrin - Behavioral & Neoclassical asset pricing theories - 2008

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