Invites you to a

School seminar presented by

Bruce Preston

(University of Melbourne)

Asset Pricing with Non-rational Expectations

Thursday 24 November

11.00am – 12.30pm

Via Zoom: Meeting Link

Abstract: Economic models used for policy analysis can neither account for observed large swings in asset prices given fundamentals nor explain the impact of asset price changes on the real economy. This paper derives a generalized no-arbitrage condition that prices assets under a general class of non-rational, “distorted” beliefs. This condition predicts equilibrium asset prices persistently deviate from the “fundamentals” rational expectations price. Income effects from distorted beliefs modify the dynamic effects of economic disturbances and engender spill-over effects across asset, product and input markets. We show these effects matter for monetary policy.

For further information contact: School seminar series coordinators Dr Ye Lu (ye.lu1@sydney.edu.au) & Dr Alastair Fraser (alastair.fraser@sydney.edu.au)

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