IDEAS home Printed from https://ideas.repec.org/p/upf/upfgen/121.html
   My bibliography  Save this paper

Arbitrage, bubbles and valuation

Author

Listed:
  • Jan Werner

Abstract

The standard present value rule of asset pricing may fail in financial markets when infinitely many assets can be traded. The author provides an example of asset payoffs and prices such that prices are arbitrage-free and could be equilibrium prices in frictionless markets. Using valuation theory methods, the author shows that asset prices can be meaningfully decomposed into a fundamental value and a pricing bubble. The fundamental value obeys the present value rule. Copyright 1997 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Jan Werner, 1995. "Arbitrage, bubbles and valuation," Economics Working Papers 121, Department of Economics and Business, Universitat Pompeu Fabra.
  • Handle: RePEc:upf:upfgen:121
    as

    Download full text from publisher

    File URL: https://econ-papers.upf.edu/papers/121.pdf
    File Function: Whole Paper
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Isabelle Maignan & David A Ralston, 2002. "Corporate Social Responsibility in Europe and the U.S.: Insights from Businesses' Self-presentations," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 33(3), pages 497-514, September.
    2. Greenley, Gordon E. & Hooley, Graham J. & Rudd, John M., 2005. "Market orientation in a multiple stakeholder orientation context: implications for marketing capabilities and assets," Journal of Business Research, Elsevier, vol. 58(11), pages 1483-1494, November.
    3. Keller, Kevin Lane, 2003. " Brand Synthesis: The Multidimensionality of Brand Knowledge," Journal of Consumer Research, Oxford University Press, vol. 29(4), pages 595-600, March.
    4. Ingemar Dierickx & Karel Cool, 1989. "Asset Stock Accumulation and Sustainability of Competitive Advantage," Management Science, INFORMS, vol. 35(12), pages 1504-1511, December.
    5. Kevin Lane Keller & Donald R. Lehmann, 2006. "Brands and Branding: Research Findings and Future Priorities," Marketing Science, INFORMS, vol. 25(6), pages 740-759, 11-12.
    6. Keith J. Blois, 1999. "Trust in Business to Business Relationships: An Evaluation of its Status," Journal of Management Studies, Wiley Blackwell, vol. 36(2), pages 197-215, March.
    7. Catherine M. Paul & Donald Siegel, 2006. "Corporate social responsibility and economic performance," Journal of Productivity Analysis, Springer, vol. 26(3), pages 207-211, December.
    8. Fry, Marie-Louise & Polonsky, Michael Jay, 2004. "Examining the unintended consequences of marketing," Journal of Business Research, Elsevier, vol. 57(11), pages 1303-1306, November.
    9. Ingemar Dierickx & Karel Cool, 1989. "Asset Stock Accumulation and the Sustainability of Competitive Advantage: Reply," Management Science, INFORMS, vol. 35(12), pages 1514-1514, December.
    10. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gilles, Christian & LeRoy, Stephen F., 1998. "Arbitrage, martingales and bubbles," Economics Letters, Elsevier, vol. 60(3), pages 357-362, September.
    2. Araujo, Aloisio & Novinski, Rodrigo & Páscoa, Mário R., 2011. "General equilibrium, wariness and efficient bubbles," Journal of Economic Theory, Elsevier, vol. 146(3), pages 785-811, May.
    3. Kevin X.D. Huang & Jan Werner, 1997. "Valuation bubbles and sequential bubbles," Economics Working Papers 303, Department of Economics and Business, Universitat Pompeu Fabra, revised Dec 1997.
    4. Werner, Jan, 2014. "Rational asset pricing bubbles and debt constraints," Journal of Mathematical Economics, Elsevier, vol. 53(C), pages 145-152.

    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

    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:upf:upfgen:121. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://www.econ.upf.edu/ .

    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.

    We have no references for this item. You can help adding them by using 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.