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The identification of beliefs from asset demand

Author

Listed:
  • Kubler, Felix

    (IBF, University of Zurich and Swiss Finance Institute)

  • Polemarchakis, Herakles

    (Department of Economics, University of Warwick)

Abstract

The demand for assets as prices and initial wealth vary identifies beliefs and attitudes towards risk. We derive conditions that guarantee identification with no knowledge either of the cardinal utility index or of the distribution of future endowments or payoffs of assets ; the argument applies even if the asset market is incomplete and demand is observed only locally.

Suggested Citation

  • Kubler, Felix & Polemarchakis, Herakles, 2015. "The identification of beliefs from asset demand," CRETA Online Discussion Paper Series 01, Centre for Research in Economic Theory and its Applications CRETA.
    • Handle: RePEc:wrk:wcreta:01
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    References listed on IDEAS

    as
    1. Robert J. Shiller, 2015. "Irrational Exuberance," Economics Books, Princeton University Press, edition 3, number 10421.
    2. Philip Dybvig & Heraklis Polemarchakis, 1981. "Recovering Cardinal Utility," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 48(1), pages 159-166.
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    4. Federico Echenique & Kota Saito, 2015. "Savage in the Market," Econometrica, Econometric Society, vol. 83(4), pages 1467-1495, July.
    5. Felix Kubler & Larry Selden & Xiao Wei, 2014. "Asset Demand Based Tests of Expected Utility Maximization," American Economic Review, American Economic Association, vol. 104(11), pages 3459-3480, November.
    6. Varian, Hal R., 1983. "Nonparametric Tests of Models of Investor Behavior," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 18(3), pages 269-278, September.
    7. Mas-Colell, Andreu, 1977. "The Recoverability of Consumers' Preferences from Market Demand Behavior," Econometrica, Econometric Society, vol. 45(6), pages 1409-1430, September.
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    10. Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-1445, November.
    11. Chiappori, P. -A. & Ekeland, I. & Kubler, F. & Polemarchakis, H. M., 2004. "Testable implications of general equilibrium theory: a differentiable approach," Journal of Mathematical Economics, Elsevier, vol. 40(1-2), pages 105-119, February.
    12. Dybvig, Philip H & Rogers, L C G, 1997. "Recovery of Preferences from Observed Wealth in a Single Realization," The Review of Financial Studies, Society for Financial Studies, vol. 10(1), pages 151-174.
    13. Jaroslav Borovička & Lars Peter Hansen & José A. Scheinkman, 2016. "Misspecified Recovery," Journal of Finance, American Finance Association, vol. 71(6), pages 2493-2544, December.
    14. Kubler, F. & Chiappori, P. -A. & Ekeland, I. & Polemarchakis, H. M., 2002. "The Identification of Preferences from Equilibrium Prices under Uncertainty," Journal of Economic Theory, Elsevier, vol. 102(2), pages 403-420, February.
    15. Polemarchakis, H. M., 1983. "Observable probabilistic beliefs," Journal of Mathematical Economics, Elsevier, vol. 11(1), pages 65-75, January.
    16. Polemarchakis, H. M., 1979. "Is there an income effect?," Journal of Economic Theory, Elsevier, vol. 21(3), pages 380-388, December.
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    2. Gorno, Leandro, 2019. "Revealed preference and identification," Journal of Economic Theory, Elsevier, vol. 183(C), pages 698-739.
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    4. Kubler, Felix & Selden, Larry & Wei, Xiao, 2020. "Incomplete market demand tests for Kreps-Porteus-Selden preferences," Journal of Economic Theory, Elsevier, vol. 185(C).

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    Keywords

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    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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