The existence of speculative equilibria is proven in a simple overlapping generations, infinite horizon economy. In equilibrium, all agents bid assets according to increasing functions of private information which is uncorrelated with the fundamental value (dividend stream) of the asset. This is a unique best response to the strategies of the other agents, which implies that speculative information is valuable.
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Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number
1003.
Length: Date of creation: Aug 1992 Date of revision: Handle: RePEc:nwu:cmsems:1003
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