Speculative trade under ambiguity

Jan Werner

Journal of Economic Theory, 2022, vol. 199, issue C

Abstract: Ambiguous beliefs may lead to speculative trade and speculative bubbles. We demonstrate this by showing that the classical Harrison and Kreps (1978) example of speculative trade among agents with heterogeneous beliefs can be replicated with agents having common but ambiguous beliefs. More precisely, we show that the same asset prices and pattern of trade can be obtained in equilibrium with agents' having recursive multiple-prior expected utilities with common set of priors.

Keywords: Speculative trade; Ambiguity; Speculative bubbles (search for similar items in EconPapers)
JEL-codes: D53 D81 D84 G12 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Speculative Trade under Ambiguity (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:199:y:2022:i:c:s002205312100017x

DOI: 10.1016/j.jet.2021.105200

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