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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