IDEAS home Printed from https://ideas.repec.org/p/cwl/cwldpp/863.html

Generic Inefficiency of Stock Market Equilibrium When Markets Are Incomplete

Author

Listed:

Abstract

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.
    as

    Download full text from publisher

    File URL: https://cowles.yale.edu/sites/default/files/files/pub/d08/d0863.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Joseph E. Stiglitz, 1982. "The Inefficiency of the Stock Market Equilibrium," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(2), pages 241-261.
    2. Peter Diamond, 1980. "Efficiency with Uncertain Supply," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 47(4), pages 645-651.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Zierhut, Michael, 2019. "Nonexistence of constrained efficient production plans," Journal of Mathematical Economics, Elsevier, vol. 83(C), pages 127-136.
    2. Mirza, Afrasiab & Stephens, Eric, 2022. "Securitization and aggregate investment efficiency," Journal of Financial Intermediation, Elsevier, vol. 52(C).
    3. Yena Park, 2014. "Constrained Efficiency in a Risky Human Capital Model," RCER Working Papers 585, University of Rochester - Center for Economic Research (RCER).
    4. Ma, Chang, 2020. "Financial stability, growth and macroprudential policy," Journal of International Economics, Elsevier, vol. 122(C).
    5. Tirelli, Mario, 2008. "Constrained inefficiency in GEI: A geometric argument," Journal of Mathematical Economics, Elsevier, vol. 44(11), pages 1197-1214, December.
    6. Russell Cooper, 1984. "Insurance, Flexibility and Non-contingent Trades," Cowles Foundation Discussion Papers 691, Cowles Foundation for Research in Economics, Yale University.
    7. Raul V. Fabella, 2017. "Competition, Regulation and Institutional Quality," UP School of Economics Discussion Papers 201701, University of the Philippines School of Economics.
    8. Alvaro Rodriguez, 1996. "The stock market and the vacancy rate," Journal of Economics, Springer, vol. 63(3), pages 237-258, October.
    9. Guidi, Marco G.D. & Hillier, Joe & Tarbert, Heather, 2010. "Successfully reshaping the ownership relationship by reducing ‘moral debt’ and justly distributing residual claims: The cases from Scott Bader Commonwealth and the John Lewis Partnership," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 21(4), pages 318-328.
    10. Gersbach, Hans & Rochet, Jean-Charles, 2017. "Capital regulation and credit fluctuations," Journal of Monetary Economics, Elsevier, vol. 90(C), pages 113-124.
    11. Sergio Turner & Norovsambuu Tumennasan, 2006. "Pareto Improving Monetary Policy in Incomplete Markets," Working Papers 2006-04, Brown University, Department of Economics.
    12. Arvaniti, Maria & Carvajal, Andrés, 2018. "Risk externalities: When financial imperfections are not the problem, but part of the solution," Journal of Mathematical Economics, Elsevier, vol. 77(C), pages 87-100.
    13. Tirelli, Mario & Turner, Sergio, 2010. "A social welfare function characterizing competitive equilibria of incomplete financial markets," Research in Economics, Elsevier, vol. 64(1), pages 58-65, March.
    14. repec:bas:econth:y:2012:i:2:p:35-56 is not listed on IDEAS
    15. Giovanni Gavetti, 2012. "PERSPECTIVE—Toward a Behavioral Theory of Strategy," Organization Science, INFORMS, vol. 23(1), pages 267-285, February.
    16. Joseph E. Stiglitz, 1991. "Methodological Issues and the New Keynesian Economics," NBER Working Papers 3580, National Bureau of Economic Research, Inc.
    17. C. Mendolicchio & T. Pietra, 2021. "Full and constrained Pareto efficiency with incomplete financial markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 71(1), pages 211-234, February.
    18. Julien Bengui & Louphou Coulibaly, 2022. "Inflation and Capital Flows," NBER Working Papers 30652, National Bureau of Economic Research, Inc.
    19. Christiansen, V., 1990. "A Normative Analysis Of Capital Income Taxes In The Presence Of Aggregate Risk," The Warwick Economics Research Paper Series (TWERPS) 343, University of Warwick, Department of Economics.
    20. Johannes Matschke, 2021. "International Financial Regulation: The Role of Banking Sector Sizes," Research Working Paper RWP 21-13, Federal Reserve Bank of Kansas City, revised 14 May 2026.
    21. Augusto de la Torre & Alain Ize, 2016. "The Conceptual Foundations of Macroprudential Policy: A Roadmap," International Finance, Wiley Blackwell, vol. 19(3), pages 333-352, December.

    More about this item

    Keywords

    ;
    ;
    ;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cwl:cwldpp:863. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Brittany Ladd (email available below). General contact details of provider: https://edirc.repec.org/data/cowleus.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.