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Generic Inefficiency of Stock Market Equilibrium When Markets Are Incomplete




A stock market is a mechanism by which the ownership and control of firms is determined through the trading of securities. It is on this market that many of the major risks faced by society are shared through the exchange of securities and the production decisions that influence the present and future supply of resources are determined. If the overall structure of markets is incomplete can the stock market be expected to perform its role of exchanging risks and allocating investment efficiently? It is this question that we seek to answer.

Suggested Citation

  • John Geanakoplos & Michael Magill & Martine Quinzii & J. Dreze, 1988. "Generic Inefficiency of Stock Market Equilibrium When Markets Are Incomplete," Cowles Foundation Discussion Papers 863, Cowles Foundation for Research in Economics, Yale University.
  • Handle: RePEc:cwl:cwldpp:863
    Note: CFP 751.

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    References listed on IDEAS

    1. Joseph E. Stiglitz, 1982. "The Inefficiency of the Stock Market Equilibrium," Review of Economic Studies, Oxford University Press, vol. 49(2), pages 241-261.
    2. Peter Diamond, 1980. "Efficiency with Uncertain Supply," Review of Economic Studies, Oxford University Press, vol. 47(4), pages 645-651.
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    Securities; stock market; market efficiency;


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