Multiple Equilibria in Noisy Rational Expectations Economies

Dömötör Pálvölgyi, Gyuri Venter

Publikation: KonferencebidragPaperForskningpeer review

Resumé

This paper studies equilibrium uniqueness in standard noisy rational expectations economies with asymmetric or differential information a la Grossman and Stiglitz (1980) and Hellwig (1980). We show that the standard linear equilibrium of Grossman and Stiglitz (1980) is the unique equilibrium with a continuous price function. However, we also construct a tractable class of equilibria with discontinuous prices that have very different economic implications, including (i) jumps and crashes, (ii) significant revisions in uninformed belief due to small changes in the market price, (iii) “upward-sloping” demand curves, (iv) higher prices leading to future returns that are higher in expectation (price drift) and (v) more positively skewed. Discontinuous equilibria can be arbitrarily close to being fully-revealing. Finally, discontinuous equilibria with the same construction also exist in Hellwig (1980).
OriginalsprogEngelsk
Publikationsdato2017
Antal sider56
StatusUdgivet - 2017
BegivenhedThe 77th Annual Meeting of American Finance Association. AFA 2017 - Sheraton Grand Chicago, Chicago, USA
Varighed: 6 jan. 20178 jan. 2017
Konferencens nummer: 77
http://www.afajof.org/details/page/8672741/Paper-Submission-2017.html

Konference

KonferenceThe 77th Annual Meeting of American Finance Association. AFA 2017
Nummer77
LokationSheraton Grand Chicago
LandUSA
ByChicago
Periode06/01/201708/01/2017
Internetadresse

Emneord

  • Asymmetric information
  • Noisy rational expectations
  • Grossman-Stiglitz
  • Equilibrium multiplicity

Citer dette

Pálvölgyi, D., & Venter, G. (2017). Multiple Equilibria in Noisy Rational Expectations Economies. Afhandling præsenteret på The 77th Annual Meeting of American Finance Association. AFA 2017, Chicago, USA.
Pálvölgyi, Dömötör ; Venter, Gyuri. / Multiple Equilibria in Noisy Rational Expectations Economies. Afhandling præsenteret på The 77th Annual Meeting of American Finance Association. AFA 2017, Chicago, USA.56 s.
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Pálvölgyi, D & Venter, G 2017, 'Multiple Equilibria in Noisy Rational Expectations Economies' Paper fremlagt ved The 77th Annual Meeting of American Finance Association. AFA 2017, Chicago, USA, 06/01/2017 - 08/01/2017, .

Multiple Equilibria in Noisy Rational Expectations Economies. / Pálvölgyi, Dömötör; Venter, Gyuri.

2017. Afhandling præsenteret på The 77th Annual Meeting of American Finance Association. AFA 2017, Chicago, USA.

Publikation: KonferencebidragPaperForskningpeer review

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Pálvölgyi D, Venter G. Multiple Equilibria in Noisy Rational Expectations Economies. 2017. Afhandling præsenteret på The 77th Annual Meeting of American Finance Association. AFA 2017, Chicago, USA.