Advanced Search
MyIDEAS: Login

On the Interpretation of Price Adjustments and Demand in Asset Pricing Models with Mean-Variance Optimization

Contents:

Author Info

  • Franke, Reiner
Registered author(s):

    Abstract

    With reference to the class of asset pricing models with a market maker and mean-variance optimization of speculative agents, the note seeks to clarify the concepts behind the price adjustment rule, which are often treated somewhat carelessly in this literature. Calling attention to the distinction between the agents? desired holding of the risky asset and the desired change in their position, the following conclusion is drawn. If market prices are said to adjust in the direction of excess demand, then the story of the maximization of expected wealth should be dropped. On the other hand, the story could be perfectly maintained if the market maker were assumed to adjust prices inversely to his accumulated inventory. --

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://econstor.eu/bitstream/10419/22057/1/EWP-2008-13.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2008,13.

    as in new window
    Length:
    Date of creation: 2008
    Date of revision:
    Handle: RePEc:zbw:cauewp:7366

    Contact details of provider:
    Postal: D-24098 Kiel,Wilhelm-Seelig-Platz 1
    Phone: 0431-880 3282
    Fax: 0431-880 3150
    Web page: http://www.wiso.uni-kiel.de/econ/
    More information through EDIRC

    Related research

    Keywords: Expected wealth maximization; market maker; positions of speculative agents;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. J. Doyne Farmer & Shareen Joshi, 2000. "The price dynamics of common trading strategies," Papers cond-mat/0012419, arXiv.org.
    2. Bottazzi, Giulio & Dosi, Giovanni & Rebesco, Igor, 2005. "Institutional architectures and behavioral ecologies in the dynamics of financial markets," Journal of Mathematical Economics, Elsevier, vol. 41(1-2), pages 197-228, February.
    3. He, Xue-Zhong & Li, Youwei, 2007. "Power-law behaviour, heterogeneity, and trend chasing," Journal of Economic Dynamics and Control, Elsevier, vol. 31(10), pages 3396-3426, October.
    4. Reiner Franke & Toichiro Asada, 2008. "Incorporating positions into asset pricing models with order-based strategies," Journal of Economic Interaction and Coordination, Springer, vol. 3(2), pages 201-227, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Franke, Reiner, 2008. "Artificial Long Memory Effects in Two Agend-Based Asset Pricing Models," Economics Working Papers 2008,15, Christian-Albrechts-University of Kiel, Department of Economics.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:zbw:cauewp:7366. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.