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.
|Date of creation:||Feb 1988|
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|Publication status:||Published in Journal of Mathematical Economics (1990), 19: 113-151|
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- Peter Diamond, 1980. "Efficiency with Uncertain Supply," Review of Economic Studies, Oxford University Press, vol. 47(4), pages 645-651.
- Joseph E. Stiglitz, 1982. "The Inefficiency of the Stock Market Equilibrium," Review of Economic Studies, Oxford University Press, vol. 49(2), pages 241-261.
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