Normative inference in efficient markets

Marek Weretka

Economic Theory, 2019, vol. 68, issue 4, No 1, 787-810

Abstract: Abstract This paper develops a nonparametric method to infer social preferences over policies from prices of securities when agents have non-stationary heterogeneous preferences. We allow for arbitrary efficient risk-sharing mechanisms, formal and informal, and consider a large class of policies. We present a condition on the distribution of aggregate wealth that is necessary and sufficient for the revelation of social preferences over a universal set of policies. We also provide a weaker condition that is sufficient for revelation of social preferences for an arbitrary finite collection of policies.

Keywords: Social preferences; Normative predictions; Asset prices (search for similar items in EconPapers)
JEL-codes: D43 D53 G11 G12 L13 (search for similar items in EconPapers)
Date: 2019
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Working Paper: Normative Inference in Efficient Markets (2018)
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DOI: 10.1007/s00199-018-1144-6

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