סמינר במימון חשבונאות

Speaker: Qi Zeng (University of Melbourne

 Abstract: We study a dynamic noisy rational expectation model with higher order beliefs. Our baseline model includes three types of agents, Informed (I), Uninformed (U) and Partially informed (M). The information structure is hierarchical: The information set of the agents I includes that of the agents M, which include that of the agents U. A crucial condition for the existence of higher-order beliefs is the existence of enough linear independent (public) signals to the least informed agents U. Otherwise the updating of their beliefs collapse to lower order beliefs. Higher order beliefs affect the expected excess returns. For example, the agents U’s high expectation about the agents M’s belief about the fundamentals leads U believing that M is over-buying, and thus U will over-sell. The agents M and I, being more informed and thus knowing the agents U being making a mistake, want indeed to buy. The net effect from this shock is small but negative on the stock price. Higher order beliefs also dramatically enrich the trading volume study. The set of the buyers and sellers are different depending on different types of shocks.

The article will be  available from the finance-accounting seminar website:

https://en-recanati.tau.ac.il/Finance-Accounting-Seminars