Divergent Expectations

  • Paul Davis
  • Michael Pagano
  • Robert Schwartz
Conference paper
Part of the Zicklin School of Business Financial Markets Series book series (CUNY)


In a piece first published in Latin in 1738, the mathematician and scientist, Daniel Bernoulli wrote, “ …the determination of the value of an item must not be based on its price, but rather on the utility it yields. The price of the item is dependent only on the thing itself and is equal for everyone; the utility, however, is dependent on the particular circumstances of the person making the estimate (1954).” The statement is germane to the topic of this paper if one substitutes “expected return and risk” for “utility,” and “information set” for “the particular circumstances.” This is because an equity’s share price is the same for everyone, but each person forms his or her own expectations about the stock’s future expected return and risk based on a common information set that people may all have.


Price Discovery Market Maker Capital Asset Price Model Retail Investor Noise Trader 
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Copyright information

© Springer Science+Business Media, LLC 2009

Authors and Affiliations

  • Paul Davis
    • 1
  • Michael Pagano
  • Robert Schwartz
  1. 1.TIAA-CREF Investment Management LLCNew YorkUSA

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