Noise Trader Risk and the Welfare Effects of Privatization

Simon Grant and John Quiggin

Economics Bulletin, 2004, vol. 5, issue 9, 1-8

Abstract: Excessive volatility of asset prices like that generated in the 'noise trader'' model of De Long et al. is one factor that plausibly might contribute to an explanation of the equity premium. We extend the De Long et al. model to allow for privatization of publicly-owned assets and assess the welfare effects of such privatization in the presence of excess volatility arising from noise traders'' mistaken beliefs.

JEL-codes: D8 E6 (search for similar items in EconPapers)
Date: 2004-04-21
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Citations: View citations in EconPapers (2)

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