Welfare effects of short-sale constraints under heterogeneous beliefs
AbstractThis paper examines the welfare effects of short-sale constraints in an overlapping generations model of a financial economy with heterogeneous beliefs by focussing on the case of rational beliefs in the sense of Kurz (Econ Theory 4:877–900, 1994 ). To measure the social welfare, we adopt a measure that is based on the ex post social welfare concept in the sense of Hammond (Economica 48:235–250, 1981 ), instead of the standard ex ante criterion, since heterogeneity in beliefs invalidates it. Simulation results indicate the existence of socially optimal short-sale constraints. Copyright Springer-Verlag 2013
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Bibliographic InfoArticle provided by Springer in its journal Economic Theory.
Volume (Year): 53 (2013)
Issue (Month): 2 (June)
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Find related papers by JEL classification:
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
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