Self-Fulfilling Risk Panics: An Expected Utility Framework
Key Insights
- Even if an asset has no fundamental uncertainty with a constant dividend process, a stochastic sentiment-driven equilibrium for the asset price exists besides the well-known fundamental equilibrium.
- Our paper constructs such sentiment-driven equilibria under general utility functions within an OLG s.
Show formatted citation
@misc{ acaciamarkets-research-self-fulfilling-risk-panics-an-expected-utility-framework,
title = { Self-Fulfilling Risk Panics: An Expected Utility Framework },
author = { NBER },
year = { 2026 },
url = { https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3756316 },
note = {Summarized and classified by AcaciaFund}
}
TY - GEN TI - Self-Fulfilling Risk Panics: An Expected Utility Framework AU - NBER PY - 2026 UR - https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3756316 ER -
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Overview
Even if an asset has no fundamental uncertainty with a constant dividend process, a stochastic sentiment-driven equilibrium for the asset price exists besides the well-known fundamental equilibrium. Our paper constructs such sentiment-driven equilibria under general utility functions within an OLG structure. Our paper further shows that the existence of sentiment-driven equilibria is robust in a standard infinite-period model as long as the pricing kernel is affected by the asset price.
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