An overreaction implementation of the coherent market hypothesis and option pricing

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dc.contributor.author Schöbel, Rainer de_DE
dc.contributor.author Veith, Jochen de_DE
dc.date.accessioned 2006-05-17 de_DE
dc.date.accessioned 2014-03-18T10:02:32Z
dc.date.available 2006-05-17 de_DE
dc.date.available 2014-03-18T10:02:32Z
dc.date.issued 2006 de_DE
dc.identifier.other 284939781 de_DE
dc.identifier.uri http://nbn-resolving.de/urn:nbn:de:bsz:21-opus-22956 de_DE
dc.identifier.uri http://hdl.handle.net/10900/47493
dc.description.abstract Inspired 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.iso en de_DE
dc.publisher Universität Tübingen de_DE
dc.rights ubt-podno de_DE
dc.rights.uri http://tobias-lib.uni-tuebingen.de/doku/lic_ohne_pod.php?la=de de_DE
dc.rights.uri http://tobias-lib.uni-tuebingen.de/doku/lic_ohne_pod.php?la=en en
dc.subject.classification Optionsgeschäft de_DE
dc.subject.ddc 330 de_DE
dc.subject.other behavioral finance , coherent market hypothesis , market polarization , option pricing , overreaction , chaotic market , repelling market en
dc.title An overreaction implementation of the coherent market hypothesis and option pricing en
dc.type ResearchPaper de_DE
utue.publikation.fachbereich Wirtschaftswissenschaften de_DE
utue.publikation.fakultaet 6 Wirtschafts- und Sozialwissenschaftliche Fakultät de_DE
dcterms.DCMIType Text de_DE
utue.publikation.typ workingPaper de_DE
utue.opus.id 2295 de_DE
utue.opus.portal wiwidisk de_DE
utue.opus.portalzaehlung 306.00000 de_DE
utue.publikation.source Tübinger Diskussionsbeiträge der Wirtschaftswissenschaftlichen Fakultät ; 306 de_DE
utue.publikation.reihenname Tübinger Diskussionsbeitrag de_DE
utue.publikation.zsausgabe 306
utue.publikation.erstkatid 2136475-8

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