Affiliation:
1. Kelley School of Business, Indiana University
2. Haas School of Business, University of California at Berkeley
Abstract
Abstract
We study consumption, savings, and asset prices in economies with disagreement and production, focusing on settings with real effects of disagreement. Aggregate savings may be significantly distorted under disagreement, possibly related to the undersaving puzzle. In the production economy, mispricing mainly manifests itself in idiosyncratic risk, in contrast to the exchange economy, where the risk-free rate and expected return on the market may be distorted. Potential policy implications include the introduction of investment taxes or subsidies. Our results highlight the real effects of disagreement in financial markets, and the differences between economies with and without production.
Publisher
Oxford University Press (OUP)
Subject
Economics and Econometrics,Finance,Accounting
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