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Bublles and Charges

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Author Info

  • C. Gilles
  • S.F. Leroy

Abstract

The definition of "fundamental value" and "speculative bubbles" that are standard in macroeconomics and finance are given formal representations as the countably additive part and the purely finitely additive part (a measure and a pure charge, respectively) of the supporting price system when the commodity space is L(infinity). Examples illustrate that rational bubbles can occur in standard general equilibrium models with complete markets and a finite number of agents, even in the absence of uncertainty. Copyright 1992 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Bibliographic Info

Paper provided by Carleton University, Department of Economics in its series Carleton Economic Papers with number 89-05.

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Length: 25 pages
Date of creation: 1989
Date of revision: May 1992
Publication status: Published: Revised version in International Economic Review, Vol. 33, No. 2 (May 1992), pp. 323–339
Handle: RePEc:car:carecp:89-05

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Keywords: expectations; capital goods; economic equilibrium; economic theory;

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Cited by:
  1. Montrucchio, Luigi & Privileggi, Fabio, 1999. "On Fragility of Bubbles in Equilibrium Asset Pricing Models of Lucas-Type," POLIS Working Papers 5, Institute of Public Policy and Public Choice - POLIS.
  2. Araujo, Aloisio & Novinski, Rodrigo & Páscoa, Mário R., 2011. "General equilibrium, wariness and efficient bubbles," Journal of Economic Theory, Elsevier, vol. 146(3), pages 785-811, May.
  3. Kountzakis, C. & Polyrakis, I.A., 2013. "Coherent risk measures in general economic models and price bubbles," Journal of Mathematical Economics, Elsevier, vol. 49(3), pages 201-209.
  4. Edward Bernard Bastiaan de Rivera y Rivera & Diógenes Manoel Leiva Martin & Emerson Fernandes Marçal & Leonardo Fernando Cruz Basso, 2012. "Present value model between prices and dividends with constant and time-varying expected returns: enterprise-level Brazilian stock market evidence from non-stationary panels," Brazilian Business Review, Fucape Business School, vol. 9(4), pages 51-86, October.
  5. Randall Wright & Guillaume Rocheteau, 2011. "Liquidity and Asset Market Dynamics," 2011 Meeting Papers 103, Society for Economic Dynamics.
  6. Loewenstein, Mark & Willard, Gregory A., 2000. "Rational Equilibrium Asset-Pricing Bubbles in Continuous Trading Models," Journal of Economic Theory, Elsevier, vol. 91(1), pages 17-58, March.
  7. Bhattacharya, Utpal, 2003. "The optimal design of Ponzi schemes in finite economies," Journal of Financial Intermediation, Elsevier, vol. 12(1), pages 2-24, January.
  8. Kevin X.D. Huang & Jan Werner, 1997. "Valuation bubbles and sequential bubbles," Economics Working Papers 303, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 1997.
  9. Magill, Michael & Quinzii, Martine, 1996. "Incomplete markets over an infinite horizon: Long-lived securities and speculative bubbles," Journal of Mathematical Economics, Elsevier, vol. 26(1), pages 133-170.
  10. Burke, Jonathan L., 2009. "Quasi equilibria for growth economies," Economics Letters, Elsevier, vol. 105(3), pages 197-199, December.
  11. Gilles, Christian & LeRoy, Stephen F., 1998. "Arbitrage, martingales and bubbles," Economics Letters, Elsevier, vol. 60(3), pages 357-362, September.
  12. Ahmed, Ehsan & Barkley Rosser, J. Jr. & Uppal, Jamshed Y., 1999. "Evidence of nonlinear speculative bubbles in pacific-rim stock markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 39(1), pages 21-36.
  13. Simon van Norden & Robert Vigfusson, 1996. "Avoiding the Pitfalls: Can Regime-Switching Tests Detect Bubbles?," Meeting papers 9603001, EconWPA.
  14. Kivedal, Bjørnar Karlsen, 2013. "Testing for rational bubbles in the US housing market," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 369-381.
  15. van Norden, Simon, 1996. "Regime Switching as a Test for Exchange Rate Bubbles," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 11(3), pages 219-51, May-June.
  16. Stephen F. LeRoy, 2012. "Infinite Portfolio Strategies," Contemporary Economics, University of Finance and Management in Warsaw, vol. 6(4), December.

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