Theoretical Research and Empirical Analysis of Asset Mispricing Issues

Author: Chen Wei
Publisher:
Publish Date: 2006-12-01
Features: This book's research begins by examining the formation process of investors' "posterior beliefs" and "posterior means." Using theoretical modeling methods, it proposes an asset mispricing model based on cognitive biases induced by investor psychology and asymmetric information. Two types of theoretical models for analyzing asset mispricing are established: The first is the "static information model," which proves that if cognitive biases or asymmetric information exist, investors' Bayesian reasoning will be biased, leading to a mispricing of asset equilibrium prices; the second is the "dynamic information model," which demonstrates that when information is dynamically continuous, cognitive biases or asymmetric information will also lead to mispricing. It is therefore evident that there are two main reasons for asset mispricing: First, investors' specific psychological tendencies cause them to inappropriately apply the Bayesian rule, resulting in mispricing; second, the existence of asymmetric information can also lead to asset mispricing. The book is divided into seven parts. Chapter 1 is a literature review; Chapter 2 discusses the significance, analytical framework, and research methods of the study; Chapter 3 examines asset pricing models based on symmetric information and complete rationality; Chapter 4 explores Bayesian learning based on static and dynamic information; Chapter 5 investigates theoretical models of mispricing based on static information; Chapter 6 studies theoretical models of mispricing based on dynamic information; and Chapter 7 conducts an empirical study on mispricing.