Download or read book A Rational Expectations Equilibrium with Informative Trading Volume written by Jan Schneider and published by . This book was released on 2009 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: A large number of empirical studies find that trading volume contains information about the distribution of future returns. While these studies indicate that observing volume is helpful to an outside observer of the economy it is not clear how investors within the economy can learn from trading volume. In this paper I show how trading volume helps investors to evaluate the precision of the aggregate information in the price. I construct a model that offers a closed form solution of a rational expectations equilibrium where all investors learn from (1) private signals, (2) the market price and (3) aggregate trading volume.

Download or read book Liquidity and Asset Prices in Rational Expectations Equilibrium with Ambiguous Information written by Han N. Ozsoylev and published by . This book was released on 2015 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: The quality of information in financial asset markets is often hard to estimate. This paper analyzes information transmission in asset markets when agents treat information of unknown quality as ambiguous. We consider a market with risk-averse informed investors, risk-neutral competitive arbitrageurs, and noisy supply of the risky asset, first studied in Vives (1995a,b) with unambiguous information. Ambiguous information gives rise to the possibility of illiquid market where arbitrageurs choose not to trade in a rational expectations equilibrium. When market is illiquid, small informational or supply shocks have relatively large effects on asset prices. We show that trading volume decreases and liquidity risk increases with ambiguity about probability distribution of asset payoffs. High ambiguity may lead to excess volatility of asset prices.

Download or read book Rational Expectations Equilibrium in a Market with Restricted Access to Differential Information written by Belinda Ann Brewer Gillette and published by . This book was released on 1991 with total page 218 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Differential Information and Dynamic Behavior of Stock Trading Volume written by Hua He and published by . This book was released on 1995 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper develops a multi-period rational expectations model of stock trading in which investors have differential information concerning the underlying value of the stock. Investors trade competitively in the stock market based on their private information and the information revealed by the market-clearing prices, as well as other public news. We examine how trading volume is related to the information flow in the market and how investors' trading reveals their private information.

Download or read book A Large market Rational Expectations Equilibrium Model written by Xavier Vives and published by . This book was released on 2011 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a market with asymmetric information where a privately revealing equilibrium obtains in a competitive framework and where incentives to acquire information are preserved. The equilibrium is efficient, and the paradoxes associated with fully revealing rational expectations equilibria are precluded without resorting to noise traders. The rate at which equilibria in finite replica markets with n traders approach the equilibrium in the continuum economy is 1/[square root]n, slower than the rate of convergence to price-taking behavior (1/n); and the per capita welfare loss is dissipated at the rate 1/n, slower than the rate at which inefficiency due to market power vanishes (1/n[squared]). The model admits a reinterpretation in which behavioral traders coexist with rational traders, and it allows us to characterize the amount of induced mispricing.

Download or read book Market Games with Asymmetric Information written by Vijay Krishna and published by . This book was released on 1983 with total page 16 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Dynamic Noisy Rational Expectations Equilibrium with Insider Information written by Jerome Detemple and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study equilibria in multi-asset and multi-agent continuous-time economies with asymmetric information and bounded rational noise traders. We establish existence of two equilibria. First, a full communication one where the informed agents' signal is disclosed to the market, and static policies are optimal. Second, a partial communication one where the signal disclosed is affine in the informed and noise traders' signals, and dynamic policies are optimal. Here, information asymmetry creates demand for two public funds, as well as a dark pool where private information trades can be implemented. Markets are endogenously complete and equilibrium returns have a three factor structure, with stochastic factors and loadings. Results are valid for constant absolute risk averse investors; general vector diffusions for fundamentals; non-linear terminal payoffs, and non-Gaussian noise trading. Asset price dynamics and public information flows are endogenous, and rational expectations equilibria are special cases of the general results.

Download or read book Rational Expectations Equilibrium in a Large Economy with Segmented Asset Markets written by Buddhavarapu Sailesh Ramamurtie and published by . This book was released on 1990 with total page 378 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Information Expectations and Equilibrium written by Sonnath Basu and published by . This book was released on 1990 with total page 194 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Noisy Rational Expectations with Stochastic Fundamentals written by Carl Gaston Plat and published by . This book was released on 1995 with total page 388 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Market Games with Asymmetric Information written by Graciela Chichilnisky and published by . This book was released on with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Rational Expectations Equilibrium in an Economy with Segmented Capital Asset Markets written by Amin H. Amershi and published by . This book was released on 1995 with total page 76 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Information Expectations and Equilibrium written by Sonnath Basu and published by . This book was released on 1990 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book A Large market Rational Expectations Equilibrium Model written by Xavier Vives and published by . This book was released on 2011 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Assessing Rational Expectations 2 written by Roger Guesnerie and published by MIT Press. This book was released on 2005-02-18 with total page 498 pages. Available in PDF, EPUB and Kindle. Book excerpt: A theoretical assessment of the Rational Expectations Hypothesis through subjecting a collection of economic models to an "eductive stability" test. The rational expectations hypothesis (REH) dominates economic modeling in areas ranging from monetary theory, macroeconomics, and general equilibrium to finance. In this book, Roger Guesnerie continues the critical analysis of the REH begun in his Assessing Rational Expectations: Sunspot Multiplicity and Economic Fluctuations, which dealt with the questions raised by multiplicity and its implications for a theory of endogenous fluctuations. This second volume emphasizes "eductive" learning: relying on careful reasoning, agents must deduce what other agents guess, a process that differs from the standard evolutionary learning experience in which agents make decisions about the future based on past experiences. A broad "eductive" stability test is proposed that includes common knowledge and results in a unique "rationalizable expectations equilibrium." This test provides the basis for Guesnerie's theoretical assessment of the plausibility of the REH's expectational coordination, emphasizing, for different categories of economic models, conditions for the REH's success or failure. Guesnerie begins by presenting the concepts and methods of the eductive stability analysis in selected partial equilibrium models. He then explores to what extent general equilibrium strategic complementarities interfere with partial equilibrium considerations in the formation of stable expectations. Guesnerie next examines two issues relating to eductive stability in financial market models, speculation and asymmetric price information. The dynamic settings of an infinite horizon model are then taken up, and particular standard and generalized saddle-path solutions are scrutinized. Guesnerie concludes with a review of general questions and some "cautious" remarks on the policy implications of his analysis.

Download or read book Excess Volatility Learning and Divergence of Opinion in Financial Markets Under Rational Expectations written by John Peter Hussman and published by . This book was released on 1992 with total page 292 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Following the Actions of Others written by Youcheng Lou and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study a rational expectations equilibrium economy where agents learn from the actions of others by adopting the simple average of ex ante optimal strategies of their social network. When information is exogenous, large social networks benefit all agents if and only if agents are relatively homogeneous in terms of risk aversion. In contrast, a setting where both information acquisition and network formation are endogenous leads to small social networks in equilibrium. Both solitary action and large social networks are not stable as agents have an incentive to form, respectively disintegrate into, small social networks of just two or three agents. However, each agent would benefit if larger networks were imposed on the entire economy by a central agent. These results indicate that, in some settings, economies can benefit from greater transparency about actions. We further show that imposing large social networks on the economy reduces information acquisition, market efficiency, market liquidity, and trading volume, while increasing return volatility.