In the context of a two-state, two-trader financial market herd model introduced by Avery and Zemsky (1998) we investigate how informational ambiguity in conjunction with waves of optimism and pessimism affect investor behavior, social learning and price dynamics. Without ambiguity, neither...

We examine a production-based asset pricing model with regime-switching productivity growth, learning and ambiguity. Both mean and volatility of the growth rate of productivity are assumed to follow a Markov chain with an unobservable state. The agent's preferences are characterized by the...

We consider a quasilinear parabolic equation with quadratic gradient terms. It arises in the modelling of an optimal portfolio which maximizes the expected utility from terminal wealth in incomplete markets consisting of risky assets and non-tradable state variables. The existence of solutions...