Private Information and Sunspots in Sequential Asset Markets /
Benhabib, Jess.
Private Information and Sunspots in Sequential Asset Markets / Jess Benhabib, Pengfei Wang. - Cambridge, Mass. National Bureau of Economic Research 2014. - 1 online resource: illustrations (black and white); - NBER working paper series no. w20044 . - Working Paper Series (National Bureau of Economic Research) no. w20044. .
April 2014.
We study a model where some agents have private information about risky asset returns and trade to obtain capital gains, while others acquire the risky asset and hold it to maturity, forming expectations of returns based on market prices. We show that under such a structure, in addition to fully revealing rational expectations equilibria, there exists a continuum of equilibrium prices consistent with rational expectations, where the the asset prices are subject to sunspot shocks. Such sunspot shocks can generate persistent fluctuations in asset prices that look like a random walk in an efficient market.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.
Private Information and Sunspots in Sequential Asset Markets / Jess Benhabib, Pengfei Wang. - Cambridge, Mass. National Bureau of Economic Research 2014. - 1 online resource: illustrations (black and white); - NBER working paper series no. w20044 . - Working Paper Series (National Bureau of Economic Research) no. w20044. .
April 2014.
We study a model where some agents have private information about risky asset returns and trade to obtain capital gains, while others acquire the risky asset and hold it to maturity, forming expectations of returns based on market prices. We show that under such a structure, in addition to fully revealing rational expectations equilibria, there exists a continuum of equilibrium prices consistent with rational expectations, where the the asset prices are subject to sunspot shocks. Such sunspot shocks can generate persistent fluctuations in asset prices that look like a random walk in an efficient market.
System requirements: Adobe [Acrobat] Reader required for PDF files.
Mode of access: World Wide Web.