Belief non-equivalence and financial trade: a comment on a result by Araujo and Sandroni
Aloisio Araujo and Alvaro Sandroni have shown in [1] that in a complete-markets economy in which there are no exogenous bounds to financial trade, existence of equilibrium requires agents with prior beliefs that agree on zero-probability events, and, therefore, with asymptotically homogeneous poster...
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Universidad de los Andes, Facultad de Economía, CEDE
2018
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| Acceso en línea: | http://hdl.handle.net/1992/8004 |
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ir-1992-80042020-09-16T20:23:27Z Belief non-equivalence and financial trade: a comment on a result by Araujo and Sandroni No-equivalencia de expectativas e intercambio financiero: un comentario a un resultado de Araujo y Sandroni Carvajal Escobar, Andrés Mauricio Riascos Villegas, Alvaro José General equilibrium Heterogeneous beliefs Existence Equilibrio (Economía) - Investigaciones - Modelos matemáticos Incertidumbre (Economía) - Investigaciones - Modelos matemáticos Mercado financiero - Investigaciones - Modelos econométricos Macroeconomía - Investigaciones D52, G1 Aloisio Araujo and Alvaro Sandroni have shown in [1] that in a complete-markets economy in which there are no exogenous bounds to financial trade, existence of equilibrium requires agents with prior beliefs that agree on zero-probability events, and, therefore, with asymptotically homogeneous posteriors. This note illustrates the extent to which the result depends on market completeness: in general, equilibrium requires compatibility of beliefs only up to the revenue transfer opportunities allowed by the market; when the market is sufficiently incomplete, generically on the space of asset returns, even individuals who disagree on zero-probability events meet that "constrained-compatibility" requirement. Aloisio Araujo y Alvaro Sandroni han mostrado en [1] que en una economía con mercados completos en la que no existen restricciones exógenas al intercambio en mercados financieros, la existencia del equilibrio requiere que las expectativas (priors) de los agentes sobre eventos de probabilidad cero coincidan y, por lo tanto, que sean asintóticamente homogéneas (las posteriores). Esta nota ilustra qué tanto el resultado depende de la completitud de los mercados: en general, la existencia del equilibrio requiere la compatibilidad de las expectativas (priors) condicionales a las transferencias permitidas por los mercados; cuando el mercado es lo suficientemente incompleto, genéricamente en el espacio de los retornos de los activos, aún individuos que discrepan en eventos de probabilidad cero, satisfacen esta restricción de "compatibilidad - restringida". 2018-09-27T16:49:59Z 2018-09-27T16:49:59Z 2006 document publishedVersion 1657-5334 http://hdl.handle.net/1992/8004 1657-7191 eng Documentos CEDE No. 27 Julio de 2006 Al consultar y hacer uso de este recurso, está aceptando las condiciones de uso establecidas por los autores. openAccess Universidad de los Andes, Facultad de Economía, CEDE instname:Universidad de los Andes reponame:Repositorio Institucional Séneca |
| institution |
Universidad de los Andes |
| collection |
DSpace |
| language |
Inglés (English) |
| topic |
General equilibrium Heterogeneous beliefs Existence Equilibrio (Economía) - Investigaciones - Modelos matemáticos Incertidumbre (Economía) - Investigaciones - Modelos matemáticos Mercado financiero - Investigaciones - Modelos econométricos Macroeconomía - Investigaciones D52, G1 |
| spellingShingle |
General equilibrium Heterogeneous beliefs Existence Equilibrio (Economía) - Investigaciones - Modelos matemáticos Incertidumbre (Economía) - Investigaciones - Modelos matemáticos Mercado financiero - Investigaciones - Modelos econométricos Macroeconomía - Investigaciones D52, G1 Carvajal Escobar, Andrés Mauricio Riascos Villegas, Alvaro José Belief non-equivalence and financial trade: a comment on a result by Araujo and Sandroni |
| description |
Aloisio Araujo and Alvaro Sandroni have shown in [1] that in a complete-markets economy in which there are no exogenous bounds to financial trade, existence of equilibrium requires agents with prior beliefs that agree on zero-probability events, and, therefore, with asymptotically homogeneous posteriors. This note illustrates the extent to which the result depends on market completeness: in general, equilibrium requires compatibility of beliefs only up to the revenue transfer opportunities allowed by the market; when the market is sufficiently incomplete, generically on the space of asset returns, even individuals who disagree on zero-probability events meet that "constrained-compatibility" requirement. |
| format |
Desconocido (Unknown) |
| author |
Carvajal Escobar, Andrés Mauricio Riascos Villegas, Alvaro José |
| author_facet |
Carvajal Escobar, Andrés Mauricio Riascos Villegas, Alvaro José |
| author_sort |
Carvajal Escobar, Andrés Mauricio |
| title |
Belief non-equivalence and financial trade: a comment on a result by Araujo and Sandroni |
| title_short |
Belief non-equivalence and financial trade: a comment on a result by Araujo and Sandroni |
| title_full |
Belief non-equivalence and financial trade: a comment on a result by Araujo and Sandroni |
| title_fullStr |
Belief non-equivalence and financial trade: a comment on a result by Araujo and Sandroni |
| title_full_unstemmed |
Belief non-equivalence and financial trade: a comment on a result by Araujo and Sandroni |
| title_sort |
belief non-equivalence and financial trade: a comment on a result by araujo and sandroni |
| publisher |
Universidad de los Andes, Facultad de Economía, CEDE |
| publishDate |
2018 |
| url |
http://hdl.handle.net/1992/8004 |
| _version_ |
1705932432453140480 |
| score |
12,131701 |