Abstract
We consider a canonical asset pricing model, where agents with quadratic preferences are allowed to retrade a limited set of securities over multiple periods, after which these securities expire, and agents consume their liquidation values. A key assumption in this model is that agents have perfect foresight: for all future contingencies, they correctly foresee the corresponding equilibrium prices. We show that, under myopia, prices generically are as if agents had perfect foresight. Yet their choices are wrong, because of neglected re-trading opportunities. In an experiment, we find both prices and choices to be consistent with myopia.
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