Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/40317
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dc.contributor.authorSchöbel, Raineren_US
dc.contributor.authorVeith, Jochenen_US
dc.date.accessioned2008-02-21en_US
dc.date.accessioned2010-09-24T14:42:24Z-
dc.date.available2010-09-24T14:42:24Z-
dc.date.issued2006en_US
dc.identifier.piurn:nbn:de:bsz:21-opus-22956en_US
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_US
dc.language.isoengen_US
dc.publisher|aUniv., Wirtschaftswiss. Fak. |cTübingenen_US
dc.relation.ispartofseries|aTübinger Diskussionsbeitrag |x306en_US
dc.subject.jelG12en_US
dc.subject.jelG13en_US
dc.subject.ddc330en_US
dc.subject.keywordbehavioral financeen_US
dc.subject.keywordcoherent market hypothesisen_US
dc.subject.keywordmarket polarizationen_US
dc.subject.keywordoption pricingen_US
dc.subject.keywordoverreactionen_US
dc.subject.keywordchaotic marketen_US
dc.subject.keywordrepelling marketen_US
dc.subject.stwBörsenkursen_US
dc.subject.stwVolatilitäten_US
dc.subject.stwWertpapierspekulationen_US
dc.subject.stwAnlageverhaltenen_US
dc.subject.stwRisikopräferenzen_US
dc.subject.stwOptionspreistheorieen_US
dc.subject.stwSimulationen_US
dc.subject.stwTheorieen_US
dc.titleAn overreaction implementation of the coherent market hypothesis and option pricingen_US
dc.type|aWorking Paperen_US
dc.identifier.ppn558780415en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
dc.identifier.repecRePEc:zbw:tuedps:306-

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