Bubbles and multiplicity of equilibria under portfolioconstraints

This article shows that, as long as agents are required to maintain positivewealth, the presence of portfolio constraints may give rise to asset pricingbubbles in equilibrium even if there are unconstrained agents in the economywho can benefit from the induced arbitrage opportunity. Furthermore, it isshown that the presence of bubbles in the aggregate price system can lead toboth multiplicity and real indeterminacy of equilibrium.[...]

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Year of publication:	2008-09-26
Authors:	Hugonnier, Julien
Institutions:	Finrisk
Subject:	Portfoliomanagement \| portfolio management \| Aktienkurs \| Makroökonomisches Gleichgewicht \| Spekulative Blase \| Bubbles

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1 Introduction
2 The economy
A. Information structure
B. Securities market
C. Agents
D. Trading strategies and feasible plans
E. Equilibrium
3 Optimality and equilibrium
A. Individual optimality
B. Characterization of equilibrium
4 Equilibrium pricing bubbles
A. Characterization
B. Bubbles and multiplicity of equilibria
5 Limited market participation
A. The economy
B. Equilibrium
C. Comparative static analysis
6 Multiplicity in a two stocks model
A. The economy
B. Existence and multiplicity of equilibria
7 Conclusion
A Technical results
B Proofs
References

Persistent link: https://www.econbiz.de/10005868914