Asset Markets and the Information Revealed by Prices

When nominal assets serve to transfer revenues across states of the world, noninformative rational expectations equilibria exist. At noninformative prices, the restricted information under which individuals optimize can be modelled as restricted participation of the individuals in asset markets. Whe...

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Bibliographic Details
Published in:Economic theory 1993-01, Vol.3 (4), p.645-661
Main Authors: Polemarchakis, H. M., Siconolfi, P.
Format: Article
Language:English
Subjects:
Asset markets
Assets
Budget constraints
Commodities
Commodity prices
Economic competition
Economic expectations
Economic theory
Equilibrium
Equilibrium prices
Information
Market economies
Prices
Rational expectations theory
Utility functions
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Summary:When nominal assets serve to transfer revenues across states of the world, noninformative rational expectations equilibria exist. At noninformative prices, the restricted information under which individuals optimize can be modelled as restricted participation of the individuals in asset markets. When assets are nominal, the indeterminacy of equilibrium prices, and, generically, allocations as well, which characterizes economies with restricted participation guarantees that noninformative equilibrium prices exist.
ISSN:0938-2259
1432-0479
DOI:10.1007/BF01210264