City Research Online

Asset Pricing with Mean reversion: The Case of Ships

Moutzouris, I. & Nomikos, N. ORCID: 0000-0003-1621-2991 (2019). Asset Pricing with Mean reversion: The Case of Ships. Journal of Banking and Finance, 111, 105708.. doi: 10.1016/j.jbankfin.2019.105708

Abstract

We develop a heterogeneous-beliefsasset pricing model with microeconomic foundations that reproducesasset prices, cash flowsand tradingactivity ina real asset economy. In contrast to the majority of financial markets’ behavioural models,and in line with the nature of the shipping industry, in this model agents extrapolate fundamentals. Formal estimation of the model indicates that an economy where a small fraction of agents significantly extrapolates fundamentals can explain the positive relation between earnings, vessel prices,and trading activity.

Publication Type: Article
Additional Information: © 2019 Elsevier. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/ ----- Acceptance date may be wrong on CRO (26/11/19) as publishers website states 21/11/19.
Publisher Keywords: Behavioural Finance, Asset Pricing, Biased Beliefs, Cash Flow Extrapolation, Heterogeneous-Agents
Subjects: H Social Sciences > HE Transportation and Communications
H Social Sciences > HG Finance
Departments: Bayes Business School > Finance
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