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Information asymmetry and equilibrium models in behavioral finance

Editor

Listed:
  • Campi, Luciano
  • Mancino, Maria Elvira

Author

Listed:
  • Del Vigna, Matteo

Abstract

In this thesis we explore two recent topics in behavioral finance, namely portfolio optimization by non-expected utility insiders and existence of equilibria in financial markets populated by heterogeneous agents. Firstly, we review a number of theories which have been used to model behavioral decision makers’ preferences. In the second chapter, we set and solve a portfolio optimization problem in continuous time for an insider trader following Cumulative Prospect Theory (CPT). We provide an analysis in the strong as well as partial and weak information cases and we perform a comparison with respect to an Expected Utility (EU) decision maker. In the third chapter, we study equilibrium models in a one-period stylized financial market where agents with different preference structures can interact. We give sufficient conditions for existence when a large EU, a large CPT investor and an accommodating market maker trade. At last, the case of many EU and many CPT agents is presented.

Suggested Citation

  • Del Vigna, Matteo, 2012. "Information asymmetry and equilibrium models in behavioral finance," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/9075 edited by Campi, Luciano & Mancino, Maria Elvira.
    • Handle: RePEc:dau:thesis:123456789/9075
    Note: dissertation
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    More about this item

    Keywords

    Finance comportementale; délit d'initié; information faible; aversion aux pertes; agents hétérogènes; Behavioral fi nance; insider trading; weak information; Cumulative Prospect Theory; loss aversion; heterogeneous agents;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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