Updating toward the signal
Modelers frequently assume (either implicitly or explicitly) that an agent’s posterior expectation of some variable lies between their prior mean and the realization of an unbiased signal of that variable. We call this property updating toward the signal (UTS). We show that if the prior and signal error densities are both symmetric and quasiconcave then UTS will occur. If, for a given prior, UTS occurs for all symmetric and quasiconcave error densities, then in fact the prior must be symmetric and quasiconcave. Similar characterizations are derived for two additional updating requirements that are strictly weaker than UTS. Copyright The Author(s) 2012
Volume (Year): 50 (2012)
Issue (Month): 3 (August)
|Contact details of provider:|| Web page: http://link.springer.de/link/service/journals/00199/index.htm|
|Order Information:||Web: http://link.springer.de/orders.htm|
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.:
- Paolo Ghirardato, 2002. "Revisiting Savage in a conditional world," Economic Theory, Springer, vol. 20(1), pages 83-92.
- Nidhiya Menon & Narayanan Subramanian, 2008. "Learning, diversification and the nature of risk," Economic Theory, Springer, vol. 35(1), pages 117-145, April.
- Lan Zhang & Per A. Mykland & Yacine Ait-Sahalia, 2003.
"A Tale of Two Time Scales: Determining Integrated Volatility with Noisy High Frequency Data,"
NBER Working Papers
10111, National Bureau of Economic Research, Inc.
- Zhang, Lan & Mykland, Per A. & Ait-Sahalia, Yacine, 2005. "A Tale of Two Time Scales: Determining Integrated Volatility With Noisy High-Frequency Data," Journal of the American Statistical Association, American Statistical Association, vol. 100, pages 1394-1411, December.
- Sanford J Grossman & Joseph E Stiglitz, 1997.
"On the Impossibility of Informationally Efficient Markets,"
Levine's Working Paper Archive
1908, David K. Levine.
- Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
- Wilson, Robert, 1977. "A Bidding Model of Perfect Competition," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 511-18, October.
- Feldman, M, 1991. "On the Generic Nonconvergence of Bayesian Actions and Beliefs," Economic Theory, Springer, vol. 1(4), pages 301-21, October.
- Harry Markowitz, 1952. "Portfolio Selection," Journal of Finance, American Finance Association, vol. 7(1), pages 77-91, 03.
- Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
- Shapiro, Carl, 1986. "Exchange of Cost Information in Oligopoly," Review of Economic Studies, Wiley Blackwell, vol. 53(3), pages 433-46, July.
- James Peck & Matthew O. Jackson, 1999.
"Asymmetric information in a competitive market game: Reexamining the implications of rational expectations,"
Springer, vol. 13(3), pages 603-628.
- Matthew O. Jackson & James Peck, 1997. "Asymmetric Information in a Competitive Market Game: Reexamining the Implications of Rational Expectations," Microeconomics 9711004, EconWPA.
- James Berger & Elías Moreno & Luis Pericchi & M. Bayarri & José Bernardo & Juan Cano & Julián Horra & Jacinto Martín & David Ríos-Insúa & Bruno Betrò & A. Dasgupta & Paul Gustafson & Larry Wasserman &, 1994. "An overview of robust Bayesian analysis," TEST: An Official Journal of the Spanish Society of Statistics and Operations Research, Springer, vol. 3(1), pages 5-124, June.
- Daniel Quint, 2010. "Looking smart versus playing dumb in common-value auctions," Economic Theory, Springer, vol. 44(3), pages 469-490, September.
- Yaron Azrieli & Ehud Lehrer, 2007. "Market Games in Large Economies with a Finite Number of Types," Economic Theory, Springer, vol. 31(2), pages 327-342, May.
- Hansen, Peter R. & Lunde, Asger, 2006. "Realized Variance and Market Microstructure Noise," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 127-161, April.
- Zhou, Bin, 1996. "High-Frequency Data and Volatility in Foreign-Exchange Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 14(1), pages 45-52, January.
- William Novshek & Hugo Sonnenschein, 1982. "Fulfilled Expectations Cournot Duopoly with Information Acquisition and Release," Bell Journal of Economics, The RAND Corporation, vol. 13(1), pages 214-218, Spring.
- Michael Rothschild, 1974. "Searching for the Lowest Price When the Distribution of Prices Is Unknown: A Summary," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 3, number 1, pages 293-294 National Bureau of Economic Research, Inc.
- Franklin Allen & Stephen Morris & Hyun Song Shin, 2006. "Beauty Contests and Iterated Expectations in Asset Markets," Review of Financial Studies, Society for Financial Studies, vol. 19(3), pages 719-752.
- Steven Tadelis, 2003. "Firm reputation with hidden information," Economic Theory, Springer, vol. 21(2), pages 635-651, 03.
- Alvaro Sandroni, 2005. "Efficient markets and Bayes’ rule," Economic Theory, Springer, vol. 26(4), pages 741-764, November.
- Rothschild, Michael, 1974. "Searching for the Lowest Price When the Distribution of Prices Is Unknown," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 689-711, July/Aug..
When requesting a correction, please mention this item's handle: RePEc:spr:joecth:v:50:y:2012:i:3:p:765-786. 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: (Sonal Shukla)or (Christopher F Baum)
If references are entirely missing, you can add them using this form.