search query: @author Veronesi, P. / total: 4
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| Author: | Veronesi, P. |
| Title: | Stock market overreaction to bad news in good times: a rational expectations equilibrium model |
| Journal: | Review of Financial Studies
1999 : WINTER, VOL. 12:5, p. 975-1007 |
| Index terms: | FINANCE STOCK MARKETS EQUILIBRIUM ANALYSIS |
| Language: | eng |
| Abstract: | This article presents a dynamic, rational expectations equilibrium model of asset prices where the drift of fundamentals (dividends) shifts between two unobservable states at random times. The author shows that in equilibrium, investors' willingness to hedge against changes in their own "uncertainty" on the true state makes stock prices overreact to bad news in good times and underact to good news in bad times. The author then shows that this model is better able than conventional models with no regime shifts to explain features of stock returns. |
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