Abstract

http://ssrn.com/abstract=808284
 
 

References (34)



 
 

Citations (4)



 


 



How Equilibrium Prices Reveal Information in Time Series Models with Disparately Informed, Competitive Traders


Todd B. Walker


Indiana University Bloomington - Department of Economics

September 22, 2006

CAEPR Working Paper No. 2006-011

Abstract:     
Accommodating asymmetric information in a dynamic asset pricing model is technically challenging due to the problems associated with higher-order expectations. That is, rational investors are forced into a situation where they must forecast the forecasts of other agents (i.e., form higher-order expectations). In a dynamic setting, this problem telescopes into the infinite future and the dimension of the relevant state space approaches infinity. By employing the frequency domain approach of Whiteman (1983) and Kasa (2000), this paper demonstrates how information structures previously believed to lead to disparate expectations in equilibrium (e.g., Singleton (1987)) converge to a symmetric equilibrium. The "revealing" aspect of the price process lies in the invertibility of the observed state space, which makes it possible for agents to inferthe economically fundamental shocks, thus eliminating the need to forecast the forecasts of others.

Number of Pages in PDF File: 29

Keywords: Asset Pricing, Asymmetric Information

JEL Classification: G12, D82

working papers series


Download This Paper

Date posted: September 30, 2005  

Suggested Citation

Walker, Todd B., How Equilibrium Prices Reveal Information in Time Series Models with Disparately Informed, Competitive Traders (September 22, 2006). CAEPR Working Paper No. 2006-011. Available at SSRN: http://ssrn.com/abstract=808284 or http://dx.doi.org/10.2139/ssrn.808284

Contact Information

Todd B. Walker (Contact Author)
Indiana University Bloomington - Department of Economics ( email )
Bloomington, IN 47405-6620
United States

Feedback to SSRN


Paper statistics
Abstract Views: 688
Downloads: 98
Download Rank: 157,697
References:  34
Citations:  4

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.359 seconds