Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments January 6, 2022 erstellt
Beschreibung:
We develop a general equilibrium model where investors experience money and nominal-price illusions. Our theoretical results show that the compounding effects of money and nominal-price illusions increase (decrease) stock prices (yields). Our empirical analysis documents that the effect of money illusion is particularly more pronounced among low-priced stocks due to an existing nominal-price illusion. The compounded effect of money and nominal-price illusions is larger during high-inflation periods, economic downturns, and for stocks with low institutional ownership. We show that the compounding illusion effects are present even when we control valuation uncertainties on low-priced stocks, including idiosyncratic volatility and firm age