Author: Margaritis, DimitrisPublisher:
ISBN:
Category : Market (Economics)
Languages : en
Pages : 28
Book Description
Learning and Convergence to a Noisy Rational Expectations Equilibrium in an Asset Market Model
Author: Margaritis, DimitrisPublisher:
ISBN:
Category : Market (Economics)
Languages : en
Pages : 28
Book Description
Learning and Convergence to a Noisy Rational Expectations Equilbrium in an Asset Market Model
Author: Dimitris MargaritisAn Equilibrium Model of Market Efficiency with Bayesian Learning
Author: Omri RossPublisher:
ISBN:
Category :
Languages : en
Pages : 16
Book Description
A simple discrete-time financial market model is introduced. The market participants consist of a collection of noise traders as well as a distinguished agent who uses the price information as it arrives to update her demand for the assets. It is shown that the distinguished agent's demand converges, both almost surely and in mean square, to a demand consistent with the rational expectations hypothesis, and the rate of convergence is calculated explicitly. Furthermore, the convergence of the standardised deviations from this limit is established. The rate of convergence, and hence the efficiency of this market, is an increasing function of both the risk-free interest rate and the relative number of noise traders in the market. An efficient market, therefore, measured in terms of a high proportion of informed traders, seems incompatible with the notion that efficient markets converge quickly.
A Noisy Rational Expectations Equilibrium for Multi-asset Securities Markets
Author: Anat R. AdmatiPublisher:
ISBN:
Category : Rational expectations (Economic theory)
Languages : en
Pages : 37
Book Description
Rational Expectations Equilibrium in an Economy with Segmented Capital Asset Markets
Author: Amin H. AmershiPublisher:
ISBN:
Category : Capital market
Languages : en
Pages : 76
Book Description
Multi-asset Noisy Rational Expectations Equilibrium with Contingent Claims
Author: Rational Expectations Equilibrium in a Large Economy with Segmented Asset Markets
Author: Buddhavarapu Sailesh RamamurtiePublisher:
ISBN:
Category :
Languages : en
Pages : 378
Book Description
Asset Pricing in an Intertemporal Noisy Rational Expectations Equilibrium
Author: Jérôme DetempleDynamic Noisy Rational Expectations Equilibrium with Insider Information
Author: Jerome DetemplePublisher:
ISBN:
Category :
Languages : en
Pages : 0
Book Description
We study equilibria in multi-asset and multi-agent continuous-time economies with asymmetric information and bounded rational noise traders. We establish existence of two equilibria. First, a full communication one where the informed agents' signal is disclosed to the market, and static policies are optimal. Second, a partial communication one where the signal disclosed is affine in the informed and noise traders' signals, and dynamic policies are optimal. Here, information asymmetry creates demand for two public funds, as well as a dark pool where private information trades can be implemented. Markets are endogenously complete and equilibrium returns have a three factor structure, with stochastic factors and loadings. Results are valid for constant absolute risk averse investors; general vector diffusions for fundamentals; non-linear terminal payoffs, and non-Gaussian noise trading. Asset price dynamics and public information flows are endogenous, and rational expectations equilibria are special cases of the general results.
Information and Learning in Markets
Author: Xavier VivesPublisher: Princeton University Press
ISBN: 140082950X
Category : Business & Economics
Languages : en
Pages : 422
Book Description
The ways financial analysts, traders, and other specialists use information and learn from each other are of fundamental importance to understanding how markets work and prices are set. This graduate-level textbook analyzes how markets aggregate information and examines the impacts of specific market arrangements--or microstructure--on the aggregation process and overall performance of financial markets. Xavier Vives bridges the gap between the two primary views of markets--informational efficiency and herding--and uses a coherent game-theoretic framework to bring together the latest results from the rational expectations and herding literatures. Vives emphasizes the consequences of market interaction and social learning for informational and economic efficiency. He looks closely at information aggregation mechanisms, progressing from simple to complex environments: from static to dynamic models; from competitive to strategic agents; and from simple market strategies such as noncontingent orders or quantities to complex ones like price contingent orders or demand schedules. Vives finds that contending theories like informational efficiency and herding build on the same principles of Bayesian decision making and that "irrational" agents are not needed to explain herding behavior, booms, and crashes. As this book shows, the microstructure of a market is the crucial factor in the informational efficiency of prices. Provides the most complete analysis of the ways markets aggregate information Bridges the gap between the rational expectations and herding literatures Includes exercises with solutions Serves both as a graduate textbook and a resource for researchers, including financial analysts