Normative Inference in Efficient Markets

Marek Weretka

No 29, GRAPE Working Papers from GRAPE Group for Research in Applied Economics

Abstract: This paper develops a non-parametric 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: Collateral Constraints; Adaptive Learning; Financial Shocks; Great Recession (search for similar items in EconPapers)
JEL-codes: E32 E44 G18 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2018
New Economics Papers: this item is included in nep-mac
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Related works:
Journal Article: Normative inference in efficient markets (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:fme:wpaper:29

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