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Beauty Contests and Asset Prices under Asymmetric Information
| Title: | Beauty Contests and Asset Prices under Asymmetric Information |
| Authors: | Ishikawa, Ryuichiro Browse this author | | Kudoh, Noritaka Browse this author |
| Keywords: | higher-order expectations | | asset prices | | asymmetric information |
| Issue Date: | 24-Jan-2010 |
| Publisher: | Graduate School of Economics & Business Administration, Hokkaido University |
| Journal Title: | Discussion Paper, Series A |
| Volume: | 218 |
| Start Page: | 1 |
| End Page: | 30 |
| Abstract: | In this paper, we study a dynamic Gaussian financial market model in which the traders form higher-order expectations about the fundamental value of a single risky asset. Rational uninformed traders are introduced into an otherwise standard differential information economy to investigate the impact of asymmetric information. In a two-period economy, there is a unique linear equilibrium; beauty contests under asymmetric information do not introduce excess volatility driven by self-fulfilling multiple equilibria. Under certain conditions, there is a nonmonotonic relationship between price volatility and the proportion of uninformed traders. |
| Type: | bulletin (article) |
| URI: | http://hdl.handle.net/2115/42576 |
| Appears in Collections: | Discussion paper > Series A
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Submitter: 工藤 教孝
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