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Speculation in Financial Markets: A Survey

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  • Felipe Zurita

    (Instituto de Economía. Pontificia Universidad Católica de Chile.)

Abstract

This survey covers the microeconomic theory of speculation in financial markets, since the development of the economics of uncertainty. It starts with a description of Walrasian exchange economies, both in general equilibrium –the Arrow-Debreu model and its extensions– and in partial equilibrium. Speculation, it is explained, is an incomplete-market phenomenon. It proceeds by analyzing more general voluntary trade environments, with a focus on whether or not differences in information are a valid source for belief heterogeneity. The role of common priors in the no-trade theorem is discussed. Finally, heterogeneous priors models are considered.

Suggested Citation

  • Felipe Zurita, 2001. "Speculation in Financial Markets: A Survey," Documentos de Trabajo 197, Instituto de Economia. Pontificia Universidad Católica de Chile..
    • Handle: RePEc:ioe:doctra:197
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    File URL: https://www.economia.uc.cl/docs/doctra/dt-197.pdf
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    References listed on IDEAS

    as
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