Asset market equilibrium with short-selling and differential information

We introduce differential information in the asset market model studied by Cheng J Math Econ 20(1):137–152, 1991, Dana and Le Van J Math Econ 25(3):263–280, 1996 and Le Van and Truong Xuan J Math Econ 36(3):241–254, 2001. We prove an equilibrium existence result assuming that the economy's info...

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Bibliographic Details
Published inEconomic theory Vol. 32; no. 3; pp. 425 - 446
Main Authors Daher, Wassim, Martins-da-Rocha, V. Filipe, Vailakis, Yiannis
Format Journal Article
LanguageEnglish
Published Heidelberg Springer 01.09.2007
Springer Nature B.V
Subjects
Arbitrage
Asset markets
Asymmetric information
Capital market
Contract incentives
Economic expectations
Economic information
Economic modeling
Economic theory
Economic uncertainty
Financial theory
Information economics
Information economy
Information theory
Market equilibrium
Mathematics
Prices
Short sales
Utility functions
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Summary:We introduce differential information in the asset market model studied by Cheng J Math Econ 20(1):137–152, 1991, Dana and Le Van J Math Econ 25(3):263–280, 1996 and Le Van and Truong Xuan J Math Econ 36(3):241–254, 2001. We prove an equilibrium existence result assuming that the economy's information structure satisfies the conditional independence property. If private information is not publicly verifiable, agents have incentives to misreport their types and therefore contracts may not be executed in the second period. We also show that under the conditional independence property equilibrium contracts are always executable.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
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ISSN:0938-2259
1432-0479
DOI:10.1007/s00199-006-0131-5