August 14, 1999. But this model also predicts that the dividend yield has lost all marginal ability to forecast as of the late 1990's. Consequently, the view that the dividend yield predicts future equity premia as of 1999 must necessarily be exclusively based on a theoretical prior. On the Evolution of Overconfidence and Entrepreneurs. This paper explains why seemingly irrational overconfident behavior can persist.
Information aggregation is poor in groups in which most individuals herd.
However, entrepreneurs make mistakes and thus die more frequently. The socially optimal proportion of entrepreneurs trades off the positive information externality against high attrition rates of entrepreneurs, and depends on the size of the group, on the degree of overconfidence, and on the accuracy of individuals' private information. The evolutionary stable proportion trades off the survival of the group against the survival of overconfident individuals. This paper models how imperfect memory affects the optimal continuity of policies. In a stable environment, the player rationally responds to memory loss with excess inertia , defined as a higher probability of following old policies than would occur under full recall.