Rationally 'Irrational': Theory and Empirical Evidence

30 Pages Posted: 21 Jul 2008 Last revised: 16 Dec 2009

Date Written: July 18, 2008

Abstract

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

Müller-Kademann, Christian, Rationally 'Irrational': Theory and Empirical Evidence (July 18, 2008). Available at SSRN: https://ssrn.com/abstract=1162790 or http://dx.doi.org/10.2139/ssrn.1162790

Christian Müller-Kademann (Contact Author)

Jacobs University

Campus Ring 1
Research V, Room 40
Bremen, 28759
Germany

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