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The no-trade interval of Dow and Werlang: Some clarifications

Author

Listed:
  • Alain Chateauneuf

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Caroline Ventura

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

The aim of this paper is two-fold: first, to emphasize that the seminal result of Dow and Werlang (1992) remains valid under weaker conditions, and this even if non-positive prices are considered, or equally that the no-trade interval result is robust when considering assets which can yield non-positive outcomes. Second, to make precise the weak uncertainty aversion behavior characteristic of the existence of such an interval.

Suggested Citation

  • Alain Chateauneuf & Caroline Ventura, 2010. "The no-trade interval of Dow and Werlang: Some clarifications," PSE-Ecole d'économie de Paris (Postprint) hal-00634653, HAL.
    • Handle: RePEc:hal:pseptp:hal-00634653
    DOI: 10.1016/j.mathsocsci.2009.09.008
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    Cited by:

    1. Lorenz Hartmann & David Kelsey, 2024. "Location Invariance and Games with Ambiguity," Discussion Papers 2024-05, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    2. Daniele Pennesi, 2013. "Endogenous Status Quo," Carlo Alberto Notebooks 314, Collegio Carlo Alberto.
    3. Marta Cardin & Bennett Eisenberg & Luisa Tibiletti, 2012. "Bid and Ask Prices Tailored to Traders' Risk Aversion and Gain Propension: a Normative Approach," International Journal of Business Research and Management (IJBRM), Computer Science Journals (CSC Journals), vol. 3(6), pages 294-306, December.
    4. Cillo, Alessandra & Delquié, Philippe, 2014. "Mean-risk analysis with enhanced behavioral content," European Journal of Operational Research, Elsevier, vol. 239(3), pages 764-775.
    5. Jungeilges, Jochen & Maklakova, Elena & Perevalova, Tatyana, 2021. "Asset price dynamics in a “bull and bear market”," Structural Change and Economic Dynamics, Elsevier, vol. 56(C), pages 117-128.
    6. Rinaldi, Francesca, 2009. "Endogenous incompleteness of financial markets: The role of ambiguity and ambiguity aversion," Journal of Mathematical Economics, Elsevier, vol. 45(12), pages 880-901, December.

    More about this item

    Keywords

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    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty

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