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Gurus and belief manipulation

Jouini, Elyès; Napp, Clotilde (2015), Gurus and belief manipulation, Economic Modelling, 49, p. 11-18. http://dx.doi.org/10.1016/j.econmod.2015.03.013

Type
Article accepté pour publication ou publié
External document link
http://halshs.archives-ouvertes.fr/halshs-00555609/fr/
Date
2015
Journal name
Economic Modelling
Volume
49
Publisher
Elsevier
Pages
11-18
Publication identifier
http://dx.doi.org/10.1016/j.econmod.2015.03.013
Metadata
Show full item record
Author(s)
Jouini, Elyès
CEntre de REcherches en MAthématiques de la DEcision [CEREMADE]
Napp, Clotilde cc
Dauphine Recherches en Management [DRM]
Abstract (EN)
We analyze a model with two types of agents: standard agents and gurus, i.e. agents who have the ability to influence the other investors. Gurus announce their beliefs and act accordingly. Gurus are strategic: they take into account the impact of their announced beliefs on the other agents, hence on prices. Standard agents observe gurus' performances, choose a guru and follow her/his recommendations. Prices are determined through a classical Walras mechanism. The competition among gurus for attracting followers among standard agents is governed by the level of accuracy of their predictions. The strategic behavior leads to belief subjectivity and heterogeneity among the gurus even when gurus' initial beliefs coincide with the objective belief. Optimism as well as pessimism can both emerge. We find a positive correlation across the agents between pessimism and risk tolerance. The representative agent belief, or the consensus belief is pessimistic. As a consequence of the pessimistic bias at the aggregate level, the risk premium is greater than in the standard rational expectations equilibrium. We show on an example that this impact is significative. In a multi-asset framework, the impact is stronger on the riskier assets.
Subjects / Keywords
Heterogeneous beliefs; Belief manipulation; Gurus; Optimism; Pessimism; Equity premium puzzle; Equilibrium; Riskier assets; Walras mechanism; Standard agents
JEL
G12 - Asset Pricing; Trading Volume; Bond Interest Rates
D53 - Financial Markets
D81 - Criteria for Decision-Making under Risk and Uncertainty
D82 - Asymmetric and Private Information; Mechanism Design
D83 - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
Z12 - Religion

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