Dispersion of Beliefs Bounds: Sentimental Recovery

• DOI: 10.1287/mnsc.2022.01587
• Publication Date: 2024-02-19T11:57:45Z
• Authors: Altan Pazarbaşı; Paul Schneider; Grigory Vilkov
• Keywords: Ex-ante

We present a nonparametric method to recover bound on ex ante dispersion of beliefs (DBB) from asset prices with minimal assumptions. DBB constrains the among all possible distributions in an economy, consistent observed and subject good-deal bound. In model-based economies, effectively tracks belief heterogeneity serves as diagnostic tool for evaluating model calibrations. Empirically, relates common proxies dispersion, offering real-time, market-implied disagreement measure. Our versatile approach applies both complete incomplete markets represented by any class. This paper was accepted Kay Giesecke, finance. Supplemental Material: The online appendix data files are available at https://doi.org/10.1287/mnsc.2022.01587 .