Risk and Return in Behavioral SDF-based Asset Pricing Models .pdf

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1、RiskandReturninBehavioralSDF-basedAssetPricingModels1HershShefrinMarioL.BelottiProfessorofFinanceSantaClaraUniversitySeptember20071IthankSanjivDas,ElyèsJouini,ValerioPoti,MarkSeasholes,andRamanUppalforcomments,andespeciallyJensJackwerthandAndreyUkhovforkindlysharingdatawithme.Behaviora

2、lfinanceandneoclassicalfinancehaveverydifferentimplicationsaboutassetpricingingeneralandtherelationshipbetweenriskandreturninparticular.Isurveyaselectionofrecentworksthattakentogethergenerateunifyinginsightsaboutthebehavioralcharacterofassetpricing.Thecontextfortheseinsightsisthepricin

3、gkernel-basedassetpricingframeworkdescribedinCochrane(2005).Thestrengthofthisframeworkisitsintegratedapproach,inwhichspecificassetpricingmodelssuchastheCAPM,Fama-Frenchmulti-factormodel,andtheBlack-Scholesoptionpricingformula,areallderivedasspecialcases.Attheheartoftheframeworkisthecon

4、ceptofastochasticdiscountfactor(SDF)usedtopriceanyassetastheexpectedvalueofitsexpecteddiscountedfuturecashflowstream.Proponentsofbehavioralassetpricingemphasizethatassetpricesreflectsentiment,broadlyunderstoodtomeanerroneousbeliefsaboutfuturecashflowsandrisks;seeBakerandWurgler(2007).I

5、nthissurveymymainobjectiveistodescriberecentcontributionswhichshedlightonhowsentimentmanifestsitselfwithinthestochasticdiscountfactor.Itissentimentwhichpotentiallyimpactsthepricesofallassets,andinconsequencedrivesthedifferencebetweenwhatbehavioralfinanceandneoclassicalfinancetellusabou

6、ttherelationshipbetweenriskandreturn.1.DefiningSentimentintheSDF-basedFrameworkAunifiedbehavioralapproachtoassetpricingrequiresageneraldefinitionofsentimentthatiswell-defined,measurable,andwhoseimpactcanbetracedonmarketpricesandriskpremiums.Becausethebehavioralassetpricingliteraturedev

7、elopedinordertoaddressaseriesofspecificissues,thetreatmentofsentimentinthebehavioralassetpricingliteraturehastendedtobeeclectic.Definitionsofsentimentrangefromlooselywordedstatementsaboutinvestors’mistakestoerrorswhicharemodelspecific,butvary2frommodeltomodel.DespitethefactthattheSDF