Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments August 28, 2022 erstellt
Description:
Standard finance theory has long focused on the precautionary aspects of equity investment. It identifies aggregate dividends with aggregate consumption and investors with average consumers, while treating consumption risks as stable stochastic processes. However, no consumption-based model can reconcile high equity risk premia with empirical evidence on GDP fluctuations and risk aversion. Likewise, no model with highly predictable risks can account for the volatile excess volatility of equities. A neater, more coherent alternative treats the speculative motive as paramount. Evolutionary pressures select for gambling strategies geared toward maximizing long-term wealth. Fluctuating uncertainties induce volatile excess volatility, which in turn increases the risk premia needed to maintain net long positions. In simulations that use GDP disaster risks to proxy dividend risks, rational learning with mild risk aversion generates price behavior that looks remarkably realistic. The analysis offers a new perspective on capital market rationality, central bank policy, and wealth inequality