TY  - UNPD
A1  - Curatola, Giuliano Antonio
T1  - Preference evolution and the dynamics of capital markets
T2  - SAFE working paper series ; No. 128
N2  - This paper introduces endogenous preference evolution into a Lucas-type economy and explores its consequences for investors' trading strategy and the dynamics of asset prices. In equilibrium, investors herd and hold the same portfolio of risky assets which is biased toward stocks of sectors that produce a socially preferred good. Price-dividend ratios, expected returns and return volatility are all time varying. In this way, preference evolution helps rationalize the observed under-performance and local biases of investors' portfolios and many empirical regularities of stock returns such a time variation, the value-growth effect and stochastic volatility.

Keywords: Asset pricing, general equilibrium, heterogeneous investors, interdependent preferences, portfolio choice
JEL Classification: D51, D91, E20, G12
T3  - SAFE working paper - 128 
Y1  - 2016
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/39581
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-395815
UR  - http://ssrn.com/abstract=2747269
PB  - SAFE
CY  - Frankfurt am Main
ER  -