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Noise Trader Risk and the Welfare Effects of Privatization

Author

Listed:
  • Simon Grant

    (Rice University)

  • John Quiggin

    (Australian Research Council Senior Fellow, Australian National University)

Abstract

Excessive volatility of asset prices like that generated in the 'noise trader'' model of De Long et al. is one factor that plausibly might contribute to an explanation of the equity premium. We extend the De Long et al. model to allow for privatization of publicly-owned assets and assess the welfare effects of such privatization in the presence of excess volatility arising from noise traders'' mistaken beliefs.

Suggested Citation

  • Simon Grant & John Quiggin, 2004. "Noise Trader Risk and the Welfare Effects of Privatization," Economics Bulletin, AccessEcon, vol. 5(9), pages 1-8.
    • Handle: RePEc:ebl:ecbull:eb-04e60001
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    File URL: http://www.accessecon.com/pubs/EB/2004/Volume5/EB-04E60001A.pdf
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    Cited by:

    1. John Quiggin, 2009. "Six Refuted Doctrines," Economic Papers, The Economic Society of Australia, vol. 28(3), pages 239-248, September.
    2. Grant, Simon & Quiggin, John, 2003. "The Risk Premium for Equity: Implicatiosn for Resource Allocation, Welfare adn Policy," Working Papers 2003-14, Rice University, Department of Economics.

    More about this item

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty

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