My da|ra Login
Detailed view
Replication data for: Optimal Expectations
- Brunnermeier, Markus K.
- Parker, Jonathan A.
-
Abstract
Forward-looking agents care about expected future utility flows, and hence have higher current felicity if they are optimistic. This paper studies utility-based biases in beliefs by supposing that beliefs maximize average felicity, optimally balancing this benefit of optimism against the costs of worse decision making. A small optimistic bias in beliefs typically leads to first-order gains in anticipatory utility and only second-order costs in realized outcomes. In a portfolio choice example, investors overestimate their return and exhibit a preference for skewness; in general equilibrium, investors' prior beliefs are endogenously heterogeneous. In a consumption-saving example, consumers are both overconfident and overoptimistic.
-
Is supplement to
DOI: 10.1257/0002828054825493 (Text)
-
Brunnermeier, Markus K, and Jonathan A Parker. “Optimal Expectations.” American Economic Review 95, no. 4 (August 2005): 1092–1118. https://doi.org/10.1257/0002828054825493.
- ID: 10.1257/0002828054825493 (DOI)
Update Metadata: 2020-05-18 | Issue Number: 2 | Registration Date: 2019-12-06
Brunnermeier, Markus K.; Parker, Jonathan A. (2005): Replication data for: Optimal Expectations. Version: V0. ICPSR - Interuniversity Consortium for Political and Social Research. Dataset. https://doi.org/10.3886/E116054
