By a News Reporter-Staff News Editor at Business & Finance Week -- Current study results on Finance - Economics and Finance have been published. According to news reporting originating from Changsha, People’s Republic of China, by VerticalNews correspondents, research stated, “We develop a dynamic asset pricing model with two investors with money illusions and heterogeneous beliefs about some aspects of the economy. The model is tractable and delivers closed forms for all equilibrium quantities.”
Financial support for this research came from National Natural Science Foundation of China.
Our news editors obtained a quote from the research from Hunan University, “The study shows that money illusion leads the nominal shock risk to generate spillover effects on the real side of the economy and affects all equilibrium quantities, even without inflation disagreement. We find that bond yields increase, but the stock price decreases, as money illusion increases. Bond yield and stock price volatilities increase with fundamental disagreement, while the latter decreases with inflation disagreement. We also discover that the stock risk premium is inverse-U shaped as inflation disagreement increases.”
According to the news editors, the research concluded: “Moreover, we find that the optimistic investor holds positions in real bonds and stocks, and shorts the nominal bond to hedge against the risk of market changes, which is in line with the pessimistic investor’s beliefs.”
For more information on this research see: How money illusions and heterogeneous beliefs affect asset prices. North American Journal of Economics and Finance , 2018;44():167-192. North American Journal of Economics and Finance can be contacted at: Elsevier Science Inc, 360 Park Ave South, New York, NY 10010-1710, USA. (Elsevier - www.elsevier.com; North American Journal of Economics and Finance - http://www.journals.elsevier.com/north-american-journal-of-economics-and-finance/)
The news editors report that additional information may be obtained by contacting H.L. Wang, Hunan Univ, Business Sch, Changsha 410082, Hunan, People’s Republic of China. Additional authors for this research include C.Q. Ma, F.C. Cheng and D.N. Hu.
The direct object identifier (DOI) for that additional information is: https://doi.org/10.1016/j.najef.2018.01.003. This DOI is a link to an online electronic document that is either free or for purchase, and can be your direct source for a journal article and its citation.
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CITATION: (2018-05-05), Findings from Hunan University Broaden Understanding of Economics and Finance (How money illusions and heterogeneous beliefs affect asset prices), Business & Finance Week, 69, ISSN: 1945-6441, BUTTER® ID: 015577822
From the newsletter Business & Finance Week.
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