Speculation in Financial Markets: A Survey

Felipe Zurita

No 197, Documentos de Trabajo from Instituto de Economia. Pontificia Universidad Católica de Chile.

Abstract: This survey covers the microeconomic theory of speculation in financial markets, since the development of the economics of uncertainty. It starts with a description of Walrasian exchange economies, both in general equilibrium –the Arrow-Debreu model and its extensions– and in partial equilibrium. Speculation, it is explained, is an incomplete-market phenomenon. It proceeds by analyzing more general voluntary trade environments, with a focus on whether or not differences in information are a valid source for belief heterogeneity. The role of common priors in the no-trade theorem is discussed. Finally, heterogeneous priors models are considered.

Date: 2001
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Persistent link: https://EconPapers.repec.org/RePEc:ioe:doctra:197

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