Diverse beliefs

DOI10.1080/17442508.2012.656125zbMATH Open1266.91048arXiv1001.1450OpenAlexW4234474945MaRDI QIDQ3145083FDOQ3145083

Author name not available (Why is that?)

Publication date: 13 December 2012

Published in: Stochastics (Search for Journal in Brave)

Abstract: This paper presents a general framework for studying diverse beliefs in dynamic economies. Within this general framework, the characterization of a central-planner general equilbrium turns out to be very easy to derive, and leads to a range of interesting applications. We show how for an economy with log investors holding diverse beliefs, rational overconfidence is to be expected; volume-of-trade effects are effectively modelled; the Keynesian `beauty contest' can be modelled and analysed; and bubbles and crashes arise naturally. We remark that models where agents receive private information can formally be considered as models of diverse beliefs.

Full work available at URL: https://arxiv.org/abs/1001.1450

zbMATH Keywords

equilibriumprivate informationbeauty contestdiverse beliefsdynamic general equilibrium modelmistaken beliefs

Mathematics Subject Classification ID

General equilibrium theory (91B50) Dynamic stochastic general equilibrium theory (91B51) Stochastic models in economics (91B70) Heterogeneous agent models (91B69)

Cites Work

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Cited In (4)

• Informational inefficiency in financial markets
• Lévy information and the aggregation of risk aversion
• The influence of financial practice in developing mathematical probability. Submitted for a special edition of \textit{Synthese}, ``Enabling mathematical cultures
• THE EFFECT OF TRADING FUTURES ON SHORT SALE CONSTRAINTS

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