A REPRESENTATION OF KEYNES’S LONG-TERM EXPECTATION IN FINANCIAL MARKETS

Marcello Basili, Alain Chateauneuf, Giuliano Curatola and Giuseppe Scianna ()
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Giuliano Curatola: Department of Economics and Statistics, University of Siena, Piazza San Francesco, 7-8 53100 Siena, Italy4Leibniz Institute for Financial Research SAFE, Theodor-W.-Adorno-Platz 3, 60629 Frankfurt am Main, Germany
Giuseppe Scianna: Department of Information Engineering and Mathematics, University of Siena via Roma, 56 - 53100 Siena, Italy

International Journal of Theoretical and Applied Finance (IJTAF), 2023, vol. 26, issue 06n07, 1-20

Abstract: This paper advances an intuitive representation of Keynes’s notion of long-term expectation. We introduce the epsilon-contamination approach and represent the conventional judgment by the Steiner point of agents’ common probability set. We anticipate a change in conventional judgment by updating the Steiner point.

Keywords: Keynes; long-term expectation; epsilon contamination; uncertainty; multiple priors (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1142/S0219024923500255

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