Abstract

We study how heterogeneous beliefs affect returns and examine whether they are a priced factor in traditional asset pricing models. To accomplish this task, we suggest new empirical measures based on the disagreement among analysts about expected earnings (short-term and long-term) and show they are good proxies. We first establish that the heterogeneity of beliefs matters for asset pricing and then turn our attention to estimating a structural model in which we use the forecasts of financial analysts to proxy for agents' beliefs. Finally, we investigate whether the amount of heterogeneity in analysts' forecasts can help explain asset pricing puzzles. Copyright 2005, Oxford University Press.

Keywords

Capital asset pricing modelEarningsProxy (statistics)EconomicsAsset (computer security)Investment theoryConsumption-based capital asset pricing modelFinancial economicsEconometricsFinanceComputer science

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Publication Info

Year
2005
Type
article
Volume
18
Issue
3
Pages
875-924
Citations
246
Access
Closed

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Cite This

Evan W. Anderson, Éric Ghysels, Jennifer L. Juergens (2005). Do Heterogeneous Beliefs Matter for Asset Pricing?. Review of Financial Studies , 18 (3) , 875-924. https://doi.org/10.1093/rfs/hhi026

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DOI
10.1093/rfs/hhi026

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