In a two-period pure exchange economy with financial assets, a temporary financial equilibrium is an equilibrium of the current spot and security markets given forecasts of future prices and returns. The temporary equilib-rium model can then be interpreted as a Walrasian model where preferences depend on prices. This idenfication implies, among other consequences, the generic determinateness of the equilibrium solution. It also highlights the mechanism through which forecasts of future prices parameterize current market prices of goods and assets.
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Paper provided by Carnegie Mellon University, Tepper School of Business in its series GSIA Working Papers with number
2000-E45.
Length: Date of creation: Date of revision: Handle: RePEc:cmu:gsiawp:1141626111
Contact details of provider: Postal: Tepper School of Business, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, PA 15213-3890 Web page: http://www.tepper.cmu.edu/
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