Moody Investors Drive Stock Market Swings, Reveals New Asset Pricing Model
The article suggests that people's willingness to take risks in investing is influenced more by changes in the economy than by their personal wealth. By creating a model based on this idea, the researchers found that when people are slightly moody and dissatisfied with their consumption levels, they are more likely to demand higher returns on investments. This can explain why the stock market behaves in certain ways, such as having high returns on stocks but low returns on safer investments.