Three Essays on Investor Heterogeneous Beliefs

Three Essays on Investor Heterogeneous Beliefs

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This study empirically investigates the effect of investor heterogeneous beliefs on asset markets. The first essay examines the cross-sectional relation between heterogeneous beliefs and the implied volatility smile of stock options. We find stocks with greater belief heterogeneity have more pronounced volatility smiles. In the second essay, we use the volatility smile as a proxy for heterogeneous beliefs to test competing theories on the relationship between heterogeneous beliefs and future stock returns: the overvaluation theory, the risk/uncertainty theory and the irrelevance theory. Our results are mixed.This study empirically investigates the effect of investor heterogeneous beliefs on asset markets. The first essay examines the cross-sectional relation between heterogeneous beliefs and the implied volatility smile of stock options.


Title:Three Essays on Investor Heterogeneous Beliefs
Author: Yi Zhang
Publisher:ProQuest - 2008
ISBN-13:

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