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Investor Naïveté and Asset Prices
Economic Research Service, US Department of Agriculture, Washington DC, USA
- 1 Economic Research Service, US Department of Agriculture, Washington DC, USA
Journal of Mathematical Finance·Volume 03 (2013)·Pages 448–453·Published 17 October 2013·DOI10.4236/jmf.2013.34047
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Abstract
This paper describes strategic behavior in a nonequilibrium model of asset pricing with heterogeneous sophistication. Both risk and return are increasing in the na?veté of investors in the market. Optimal investment involves in considering the effect that na?e investors have on the market. Further, we derive a simple characterization of the asset price dynamics that results from an arbitrary combination of a countably infinite set of investor types.
KeywordsLevel-<i>k-</i>ModelNonequilibrium Strategic ThinkingTechnical Analysis
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