A1506
Title: Dynamic quantile models, rational inattention, and asset prices
Authors: Jozef Barunik - UTIA AV CR vvi (Czech Republic)
Lukas Vacha - Institute of Information Theory and Automation of the CAS (Czech Republic) [presenting]
Abstract: The aim is to study asset pricing under uncertainty with agents having quantile preferences, and limited information processing capacity. Abandoning the classical asset pricing that relies on expected utility we introduce a dynamic quantile model for asset pricing, in which the agent maximizes stream of future quantile utilities instead. In addition, an agent cannot acquire all information about future states of her portfolio freely. In contrast to the rational expectation models, the agent has a limited amount of attention since the information she obtains is costly. In our model, the agent maximizes stream of her future quantile utilities according to her quantile utility preferences subject to information costs constraints. Our results show that there is a significant benefit when a standard expected utility is expanded into quantile preference utilities.
