Research
Research
Working papers
Heterogeneous Beliefs Recovery (with Julien Hugonnier)
Abstract: In a standard continuous-time economy with heterogeneous beliefs and constant relative risk aversion, equilibrium prices reveal the cross-sectional distribution of wealth and consumption shares across beliefs. Specifically, we establish a novel recovery theorem showing that the equilibrium paths of the risky asset price and the interest rate determine the evolution of these distributions. Motivated by this finding, we develop an optimization-based method to approximate the implied distribution of consumption shares across beliefs, given discrete time series of prices and interest rates. We confirm the accuracy of this method on simulated data and illustrate the versatility of our approach by providing extensions of our basic recovery theorem that allow for learning and multidimensional beliefs.
Presentations: SFI Research Days 2024, SFI PhD Workshop 2024, HSG PhD seminar, EPFL/UNIL Brown Bag seminar, UNIGE Brown Bag seminar
Work in progress
Request for Quotes with Asymmetric InformationÂ
Discussions:
Mojtaba Hayati. Scale-Dependent Returns or Dynamics of the Interest Rate?. 2025. (At SFI Research Days 2025.)
Emanuele Luzzi. The Impact of Nonlinearities on Option Portfolios. 2024. (At SFI PhD Workshop 2024.)
Bryan T. Kelly, Semyon Malamud, Mohammad Pourmohammadi, and Fabio Trojani. Universal Portfolio Shrinkage. 2023. (At SFI Research Days 2024.)