Fragile beliefs and the price of uncertainty

@inproceedings{Hansen2008FragileBA,
  title={Fragile beliefs and the price of uncertainty},
  author={Lars Peter Hansen and Thomas J. Sargent},
  year={2008}
}
A representative consumer uses Bayes’ law to learn about parameters of several models and to construct probabilities with which to perform ongoing model averaging. The arrival of signals induces the consumer to alter his posterior distribution over models and parameters. The consumer’s specification doubts induce him to slant probabilities pessimistically. The pessimistic probabilities tilt toward a model that puts long-run risks into consumption growth. That contributes a countercyclical… CONTINUE READING
Highly Cited
This paper has 62 citations. REVIEW CITATIONS

Citations

Publications citing this paper.

63 Citations

0510'09'12'15'18
Citations per Year
Semantic Scholar estimates that this publication has 63 citations based on the available data.

See our FAQ for additional information.

References

Publications referenced by this paper.
Showing 1-10 of 44 references

An introduction to the theory of rational expectations under asymmetric information.

  • S. J. Grossman
  • Review of Economic Studies,
  • 1981
Highly Influential
6 Excerpts

Incomplete information and equity premium in production economy.

  • H. Ai
  • Unpublished paper,
  • 2006
Highly Influential
7 Excerpts

Dynamic Asset Pricing Theory, third edition

  • D. Duffie
  • 2001
Highly Influential
3 Excerpts

Similar Papers

Loading similar papers…