A literary human extinction scenario

Mary Wollstonecraft Shelly's (MWS) novel, The Last Man, published in 1826, is an epic narrative about the destruction of the human race. This paper provides a synopsis of this book and assesses its relationships to contemporary future studies. The paper also delves into the history of apocalyptic writing and thinking, using this book an entry point to past literature.     

Obligations to future generations and acceptable risks of human extinction

This paper addresses the question, ‘what is the acceptable risk of human extinction?’ Three qualitative obligations to future generations - The Fairness Criterion, The Unfinished Business Criterion, and the Maintaining Options Criterion - are used to produce quantitative estimates of the acceptable risk. The resulting acceptable risks are all at or below 10⁻²⁰, a very stringent standard.     

Figuring Out the Fed—Beliefs about Policymakers and Gains from Transparency

In this paper, I use a Markov chain Monte Carlo algorithm to estimate a model of private‐sector behavior that does not feature private‐sector knowledge of the monetary policymaking process and, instead, leaves firms and households uncertain about how monetary policy is set. The private sector entertains two competing views of monetary policymaking, which I estimate. Firms and households use Bayes' law on a rolling data sample to distinguish between those two models. I use this setup to study the evolution of beliefs about the Federal Reserve and the possible gains from transparency.     

Heterogeneous Beliefs and Learning about the Expected Return in a Market for a Short-Lived Asset

This paper examines the properties of asset prices in an economy in which the true expected return on an asset is unknown and investors have heterogeneous assessments of the expected return. The principal innovation of the analysis is that the formation and evolution of investors' beliefs are modeled in a Bayesian framework. Among other things, this allows one to operationalize the notion of investor confidence. The dispersion of beliefs is, in contrast to the findings of many existing studies, not vacuous for asset prices and, in fact, can have virtually any qualitative effect on asset prices depending on the parameterization. The model has implications for the volatility of asset prices and shows that learning can give rise to some unconventional relationships, such as an inverse relationship between asset prices and risk.     

Human extinction scenario frameworks

It is a natural human instinct to wonder about the future. Some have long speculated about the various events that could potentially lead to the extinction of the human race. While a dark subject, the point of exploring factors that could drastically impact the ability to sustain life on our planet has utility in preparing for events of this nature. It is in the spirit of learning how to change before catastrophe strikes that such wondering occurs.     

World on fire: two scenarios of the destruction of human civilization and possible extinction of the human race

This paper examines the foundation for two scenarios of the future depicting how human civilization might destroy itself and possibly bring about the extinction of the human race in the process. The scenarios are based upon the two human-generated “fires” deeply ingrained within industrial civilization: (1) the nuclear “fire” of tens of thousands of nuclear weapons and their automated “launch on warning” alert systems and (2) the slow burning “fire” of global warming and runaway climate change. This paper also examines obstacles that are currently preventing the necessary first steps towards solving these problems.     

Rational Beliefs and Security Design

This article studies the security-design problem of a cash-constrainedfirm facing investors with diverse beliefs. Investor "rationalbeliefs" are modeled as varying and yet rational in the senseof Kurz (1994a). With two investors, optimal designs are similarunder rational beliefs and rational expectations. With manyinvestors, however, optimal securities under rational beliefsmaximize investor differences of opinion, while under rationalexpectations optimal designs minimize disagreements. We demonstratethat the common practice of issuing multiple securities backedby a single asset is optimal under rational beliefs but notunder rational expectations. Researching market beliefs cancreate substantial value for firms.     

Beliefs regarding fundamental value and optimal investing

Standard optimal portfolio selection models take no account of the special information that active investors believe they possess. For example, active investors who believe they can place bounds on the price of a security will want to use that information when assessing risk and expected return in order to construct an optimal portfolio. In this paper, we use two continuous-time models to analyze how placing boundaries on the price of a stock affects assessed risk, expected returns, and the optimal holdings of an active investor, and how those vary as a function of the relation between the stock price and the boundaries. In particular, the optimal strategy takes significant long/short positions as the price nears its lower/upper boundary.     

Do Heterogeneous Beliefs Matter for Asset Pricing?

We study how heterogeneous beliefs affect returns and examinewhether they are a priced factor in traditional asset pricingmodels. To accomplish this task, we suggest new empirical measuresbased on the disagreement among analysts about expected earnings(short-term and long-term) and show they are good proxies. Wefirst establish that the heterogeneity of beliefs matters forasset pricing and then turn our attention to estimating a structuralmodel in which we use the forecasts of financial analysts toproxy for agents’ beliefs. Finally, we investigate whetherthe amount of heterogeneity in analysts’ forecasts canhelp explain asset pricing puzzles.     

Model Uncertainty and Option Markets with Heterogeneous Beliefs

This paper provides option pricing and volume implications for an economy with heterogeneous agents who face model uncertainty and have different beliefs on expected returns. Market incompleteness makes options nonredundant, while heterogeneity creates a link between differences in beliefs and option volumes. We solve for both option prices and volumes and test the joint empirical implications using S&P500 index option data. Specifically, we use survey data to build an Index of Dispersion in Beliefs and find that a model that takes information heterogeneity into account can explain the dynamics of option volume and the smile better than can reduced‐form models with stochastic volatility.     

Financial Markets for Unknown Risks if Beliefs Differ

We consider a general equilibrium model with individual and collective risks. The article builds on a contribution by Chichilnisky and Heal, who show that contingent Arrow–Debreu equilibria can also be supported in economies with Arrow securities and mutual insurance contracts. However, they show this to be true in general only if beliefs are identical, a very restrictive assumption in the context of unknown risks. Moreover, they claim complete insurance in equilibrium to be impossible if beliefs are different. We show that even with different beliefs, firstly, complete insurance is possible in each statistical state, and secondly, contingent equilibrium can still be supported in economies with insurance and securities.     

YOLO: Mortality Beliefs and Household Finance Puzzles

We study the effect of subjective mortality beliefs on life‐cycle behavior. With new survey evidence, we document that survival is underestimated (overestimated) by the young (old). We calibrate a canonical life‐cycle model to elicited beliefs. Relative to calibrations using actuarial probabilities, the young undersave by 26%, and retirees draw down their assets 27% slower, while the model's fit to consumption data improves by 88%. Cross‐sectional regressions support the model's predictions: Distorted mortality beliefs correlate with savings behavior while controlling for risk preferences, cognitive, and socioeconomic factors. Overweighting the likelihood of rare events contributes to mortality belief distortions.     

城镇化要关注“人”与“地”的问题

城镇化既有利于投资,也有利于消费。但眼下,我们应该首先关注两个方面的问题,即"人"的问题和"地"的问题。     

Nominal Interest Rates and Loan Volume with Heterogeneous Beliefs

The large volume of loan transactions suggests widely divergent beliefs among borrowers and lenders, but most modern term structure theories make no prediction about volume because they assume homogeneous agents. Within these rational expectations, representative agent theories, loans are not only in zero net supply; they are also in zero gross supply. Here, the shape of the average term structure, the bias in forward interest rates, and the volume of transactions are discussed in a heuristic setting with heterogeneity and incomplete rationality. A reconciliation of heterogeneity with continuous–time term structure theory is attempted, but the results are not encouraging. Empirical data are consistent with the importance of heterogeneous beliefs.     

Beliefs affecting additional investment intentions of mutual fund clients

In this article, we aim to examine mutual fund investors’ behaviour in decision-making situations and to analyse future investment decisions via a path model approach. Investors were divided into different groups based on the risk and distribution channel used, and the differences in their investment intentions were examined. The study used empirical survey data collected from the clients of a mutual fund company owned by a Finnish banking group. Loyalty to the common banking group dominated the explanation in the whole model. The safety of the investment was important for branch office investors, whereas obtaining a good return was important for internet investors. Ultimately, explanatory power was highest for the branch office investors and lowest for the internet investors with equity funds. Most investors intended to invest more, and thus there was little variance to be explained. The results indicate that branch office investors with money market funds require more information about the investment business, although it is difficult to see who would be responsible for providing that information. This study has implications for both the theory and management of financial services.     

Inflation Targeting,Recursive Inattentiveness,and Heterogeneous Beliefs

We consider a monetary authority that provides an explicit inflation target in order to align expectations with the policy objective. However, biased perceptions of the target may arise due to imperfect information flows. We allow agents to revise expectations over time and we model their recursive choice among prediction strategies as an optimization problem under rational inattention. We then investigate whether a simple policy rule can steer the economy toward the targeted equilibrium. Our findings suggest that determinacy under rational expectations may not be sufficient to reach the target. Instead, monetary policy should be fine‐tuned to correct agents' biased beliefs.     

Heterogeneous Beliefs, Speculation, and the Equity Premium

Agents with heterogeneous beliefs about fundamental growth do not share risks perfectly but instead speculate with each other on the relative accuracy of their models' predictions. They face the risk that market prices move more in line with the trading models of competing agents than with their own. Less risk‐averse agents speculate more aggressively and demand higher risk premiums. My calibrated model generates countercyclical consumption volatility, earnings forecast dispersion, and cross‐sectional consumption dispersion. With a risk aversion coefficient less than one, agents' speculation causes half the observed equity premium and lowers the riskless rate by about 1%.     

投资者异质信念与定向增发股价长期市场表现

近年来,基于异质信念的行为金融理论已经成为国际学术界的重要研究前沿。本文结合中国资本市场特殊制度背景,首次从投资者异质信念视角实证检验了上市公司定向增发后股价长期市场表现。研究结果表明:投资者异质信念越大,上市公司实施定向增发后公司股价长期市场表现越差;当发行对象为机构投资者时,异质信念对定向增发后股价的负向作用更加显著。此外,本文还进一步发现公司定向增发后的经营业绩变化也与投资者异质信念呈显著负相关关系。本文的研究结论丰富了投资者异质信念假说在公司股权再融资领域中的研究范畴。