Stock Market Mispricing: Inflation Illusion or Resale Option?

摘要

Stock mispricing may arise when investors have subjective expectations about discount rates or dividend growth rates. We find that inflation illusion whereby investors mistakenly use subjective (I.e.,nominal) discount rates may explain the level,but not the volatility of mispricing in the U.S. market. In contrast,stock resale option induced by heterogeneous beliefs about dividend growth rates and short-sales constraints can explain both the level and the volatility of mispricing. The evidence suggests that the two hypotheses compliment each other and together provide a more complete story in explaining the level of mispricing. Nonetheless,the differential influence on mispricing volatility suggests that the resale option hypothesis may provide a more coherent explanation for asset price bubbles in which phenomenal price level often comes with excess volatility and trading frenzy.