Speculation in Financial Markets: A Survey
AbstractThis survey covers the microeconomic theory of speculation in financial markets, since the development of the economics of uncertainty. It starts with a description of Walrasian exchange economies, both in general equilibrium –the Arrow-Debreu model and its extensions– and in partial equilibrium. Speculation, it is explained, is an incomplete-market phenomenon. It proceeds by analyzing more general voluntary trade environments, with a focus on whether or not differences in information are a valid source for belief heterogeneity. The role of common priors in the no-trade theorem is discussed. Finally, heterogeneous priors models are considered.
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Bibliographic InfoPaper provided by Instituto de Economia. Pontificia Universidad Católica de Chile. in its series Documentos de Trabajo with number 197.
Date of creation: 2001
Date of revision:
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- Jayasri Dutta & Stephen Morris, .
"The Revelation of Information and Self-Fulfilling Beliefs,"
Penn CARESS Working Papers
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- Werner F. M. De Bondt & Richard H. Thaler, 1994. "Financial Decision-Making in Markets and Firms: A Behavioral Perspective," NBER Working Papers 4777, National Bureau of Economic Research, Inc.
- Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, Econometric Society, vol. 53(6), pages 1315-35, November.
- Kent Daniel & David Hirshleifer & Avanidhar Subrahmanyam, 1998. "Investor Psychology and Security Market Under- and Overreactions," Journal of Finance, American Finance Association, vol. 53(6), pages 1839-1885, December.
- Kyle, Albert S & Wang, F Albert, 1997. " Speculation Duopoly with Agreement to Disagree: Can Overconfidence Survive the Market Test?," Journal of Finance, American Finance Association, vol. 52(5), pages 2073-90, December.
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