Rationally 'Irrational': Theory and Empirical Evidence
30 Pages Posted: 21 Jul 2008 Last revised: 16 Dec 2009
Date Written: July 18, 2008
This paper presents a model for asset markets with a subjectively rational solution for the price of the traded assets. Consequently, traders cannot act objectively rational and an increase in the numbers of traders does not enlarge the information set necessary for determining the "true" price. An empirical test is suggested. It demonstrates the relevance of the argument.
Suggested Citation: Suggested Citation