Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/40317 
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dc.contributor.authorSchöbel, Raineren
dc.contributor.authorVeith, Jochenen
dc.date.accessioned2008-02-21-
dc.date.accessioned2010-09-24T14:42:24Z-
dc.date.available2010-09-24T14:42:24Z-
dc.date.issued2006-
dc.identifier.piurn:nbn:de:bsz:21-opus-22956en
dc.identifier.urihttp://hdl.handle.net/10419/40317-
dc.description.abstractInspired by the theory of social imitation (Weidlich 1970) and its adaptation to financial markets by the Coherent Market Hypothesis (Vaga 1990), we present a behavioral model of stock prices that supports the overreaction hypothesis. Using our dynamic stock price model, we develop a two factor general equilibrium model for pricing derivative securities. The two factors of our model are the stock price and a market polarization variable which determines the level of overreaction. We consider three kinds of market scenarios: Risk-neutral investors, representative Bernoulli investors and myopic Bernoulli investors. In case of the latter two, risk premia provide that herding as well as contrarian investor behaviour may be rationally explained and justified in equilibrium. Applying Monte Carlo methods, we examine the pricing of European call options. We show that option prices depend significantly on the level of overreaction, regardless of prevailing risk preferences: Downward overreaction leads to high option prices and upward overreaction results in low option prices.en
dc.language.isoengen
dc.publisher|aEberhard Karls Universität Tübingen, Wirtschaftswissenschaftliche Fakultät |cTübingenen
dc.relation.ispartofseries|aTübinger Diskussionsbeiträge |x306en
dc.subject.jelG12en
dc.subject.jelG13en
dc.subject.ddc330en
dc.subject.keywordbehavioral financeen
dc.subject.keywordcoherent market hypothesisen
dc.subject.keywordmarket polarizationen
dc.subject.keywordoption pricingen
dc.subject.keywordoverreactionen
dc.subject.keywordchaotic marketen
dc.subject.keywordrepelling marketen
dc.subject.stwBörsenkursen
dc.subject.stwVolatilitäten
dc.subject.stwWertpapierspekulationen
dc.subject.stwAnlageverhaltenen
dc.subject.stwRisikopräferenzen
dc.subject.stwOptionspreistheorieen
dc.subject.stwSimulationen
dc.subject.stwTheorieen
dc.titleAn overreaction implementation of the coherent market hypothesis and option pricing-
dc.typeWorking Paperen
dc.identifier.ppn558780415en
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen
dc.identifier.repecRePEc:zbw:tuedps:306en

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