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  • Christian, Mueller-Kademann

Abstract

This paper presents a model for asset markets with a subjectively rational solution for the price of the traded asset. Traders cannot act objectively rational and an increase in the number of traders does not enlarge the information set neccessary for determining the “true” price. Consequentely, many well-known “puzzles” vanish as there is no objective truth to which data could live up. An empirical test is conducted which demonstrates the relevance of the argument across time, space, and markets.

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File URL: http://mpra.ub.uni-muenchen.de/19852/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 19852.

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Date of creation: 15 Oct 2009
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Handle: RePEc:pra:mprapa:19852

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Keywords: rational expectations; uncertainty; Tobin tax; financial crisis;

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References

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