Our speaker will be Thomas Dangl (Vienna University of Technology).

He will give a talk on “Conservative Holdings, Aggressive Trades: Ambiguity, Learning, and Equilibrium Flows” (joint with Lorenzo Garlappi and Alex Weissensteiner).

Abstract: We propose an equilibrium model of asset prices in which agents learn about the mean and the volatility of the endowment process and differ in their concerns about parameter uncertainty. We show that, in equilibrium, following unexpected bad and good news about economic outcomes (i) uncertainty averse agents increase their risky asset holdings and (ii) the market risk premium rises. These predictions are consistent with observed portfolio flows and risk premia upon profitability surprises. Our model highlights that heterogeneity of preferences and learning about economic uncertainty are key channels for understanding the equilibrium dynamics of portfolio holdings and risk premia following news about economic outcomes.

The talk will take place on June 15, 2022 hybrid in room D3.0.222 at 12.00 p.m. - 1:00 p.m.

Zoom: Click here to join the meeting