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Normative Inference in Efficient Markets

Author

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  • Marek Weretka

    (University of Wisconsin-Madison
    Group for Research in Applied Economics (GRAPE))

Abstract

This paper develops a non-parametric method to infer social preferences over policies from prices of securities when agents have non-stationary heterogeneous preferences. We allow for arbitrary efficient risk-sharing mechanisms, formal and informal, and consider a large class of policies. We present a condition on the distribution of aggregate wealth that is necessary and sufficient for the revelation of social preferences over a universal set of policies. We also provide a weaker condition that is sufficient for revelation of social preferences for an arbitrary finite collection of policies.

Suggested Citation

  • Marek Weretka, 2018. "Normative Inference in Efficient Markets," GRAPE Working Papers 29, GRAPE Group for Research in Applied Economics.
    • Handle: RePEc:fme:wpaper:29
    as

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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Collateral Constraints; Adaptive Learning; Financial Shocks; Great Recession;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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