VGSF - WU Vienna - LC

Thomas Dangl, Vienna University of Technology

Campus WU D3.0.222 12:00 - 13:00

Organizer WU Vienna

The Fin­ance Brown Bag Sem­inar is held by the In­sti­tute for Fin­ance, Bank­ing and In­sur­ance (WU Vi­enna) and the Vi­enna Gradu­ate School of Fin­ance (VGSF). It serves as a present­a­tion plat­form for PhD stu­dents, fac­ulty mem­bers, and vis­it­ors. An over­view of BBS on the web­site of the In­sti­tute for Fin­ance, Bank­ing and In­sur­ance.


Tho­mas Dangl, Vi­enna Uni­versity of Tech­no­logy

Con­ser­vat­ive Hold­ings, Ag­gress­ive Trades: Am­bi­gu­ity, Learn­ing, and Equi­lib­rium Flows

We pro­pose an equi­lib­rium model of as­set prices in which agents learn about the mean and the volat­il­ity of the en­dow­ment pro­cess and dif­fer in their con­cerns about para­meter un­cer­tainty. We show that, in equi­lib­rium, fol­low­ing un­ex­pec­ted bad and good news about eco­nomic out­comes (i) un­cer­tainty averse agents in­crease their risky as­set hold­ings and (ii) the mar­ket risk premium rises. These pre­dic­tions are con­sist­ent with ob­served port­fo­lio flows and risk premia upon prof­it­ab­il­ity sur­prises. Our model high­lights that het­ero­gen­eity of pref­er­ences and learn­ing about eco­nomic un­cer­tainty are key chan­nels for un­der­stand­ing the equi­lib­rium dy­nam­ics of port­fo­lio hold­ings and risk premia fol­low­ing news about eco­nomic out­comes.

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