Asset Prices and Portfolio Choice with Learning from Experience

We study asset prices and portfolio choice with overlapping generations where the young
disregard history to learn from own experience. Disregarding history implies less precise
estimates of consumption growth, which, in equilibrium, leads the young to increase their
investment in risky assets after positive returns or act as trend chasers and to lose wealth
to the old. Consistent with ?ndings from survey data, the average belief about expected
returns in the economy relates negatively to future realized returns and is smoother than ob-
jective expected returns. Having especially bad experiences early on in life, cause persistent
disagreement and tilt portfolio weights.

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