Nicholas Barberis

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We examine how the evidence of predictability in asset returns a ects optimal portfolio choice for investors with long horizons. Particular attention is paid to estimation risk, or uncertainty about the true values of model parameters. We nd that even after incorporating parameter uncertainty, there is enough predictability in returns to make investors(More)
We study asset prices in an economy where investors derive direct utility not only from consumption but also from uctuations in the value of their Žnancial wealth. They are loss averse over these uctuations, and the degree of loss aversion depends on their prior investment performance. We Žnd that our framework can help explain the high mean, excess(More)
  • Rafael La Porta, Florencio Lopez-de-Silanes, +4 authors Simon A Johnson
  • 1999
Recent research on corporate governance has documented large differences between countries in ownership concentration in publicly traded firms, in the breadth and depth of financial markets, and in the access of firms to external finance. We suggest that there is a common element to the explanations of these differences, namely how well investors, both(More)
We use a simple model to outline the conditions under which corporate investment is sensitive to nonfundamental movements in stock prices. The key prediction is that stock prices have a stronger impact on the investment of “equity-dependent” firms—firms that need external equity to finance marginal investments. Using an index of equity dependence based on(More)
One of the most striking portfolio puzzles is the “disposition effect”: the tendency of individuals to sell stocks in their portfolios that have risen in value since purchase, rather than fallen in value. Perhaps the most prominent explanation for this puzzle is based on prospect theory. Despite its prominence, this explanation has received little formal(More)
We present a theory of excess stock market volatility, in which market movements are due to trades by very large institutional investors in relatively illiquid markets. Such trades generate significant spikes in returns and volume, even in the absence of important news about fundamentals. We derive the optimal trading behavior of these investors, which(More)
We study asset prices in an economy where some investors categorize risky assets into different styles and move funds among these styles depending on their relative performance. In our economy, assets in the same style comove too much, assets in different styles comove too little, and reclassifying an asset into a new style raises its correlation with that(More)
We argue that “narrow framing,” whereby an agent who is offered a new gamble evaluates that gamble in isolation, may be a more important feature of decisionmaking than previously realized. Our starting point is the evidence that people are often averse to a small, independent gamble, even when the gamble is actuarially favorable. We find that a surprisingly(More)
In this paper, we extend the mean-variance portfolio model where expected returns are obtained using maximum likelihood estimation to explicitly account for uncertainty about the estimated expected returns. In contrast to the Bayesian approach to estimation error, where there is only a single prior and the investor is neutral to uncertainty, we allow for(More)