Consistent expectations equilibria and learning in a stock market

Leopold Soegner, Hans Mitlöhner

    Research output: Contribution to journalArticle

    Abstract

    In this article we investigate the question whether the highly demanding informative requirements of rational expectations models are necessary to derive equilibria within capital market models. In this analysis agents are only provided with publicly available information such as prices and dividends. Nevertheless, we require that agents should behave like econometricians. Additionally, we skip the assumption of rational expectations models that agents know the implied actual law of motion of the system. By these assumptions, the stock market can be considered as a Hommes-Sorger consistent expectations model. We show the existence of consistent expectations equilibria with myopic agents and independent identically distributed dividends. The only CEE is the rational expectations equilibrium. In the simulation part we demonstrate how the steady-state CEE can be derived by means of sample autocorrelation learning. Thus, we are able to derive a stock market equilibrium with less demanding requirements, where this equilibrium is equal to the rational expectations equilibrium.

    Original languageEnglish (US)
    Pages (from-to)171-185
    Number of pages15
    JournalJournal of Economic Dynamics and Control
    Volume26
    Issue number2
    DOIs
    StatePublished - Feb 1 2002

    Fingerprint

    Stock Market
    Rational Expectations
    Dividend
    Market Equilibrium
    Autocorrelation
    Market Model
    Requirements
    Identically distributed
    Learning
    Stock market
    Financial markets
    Model
    Necessary
    Motion
    Demonstrate
    Simulation
    Dividends
    Rational expectations equilibrium
    Rational expectations models
    Central Eastern Europe

    Keywords

    • Artificial markets
    • Consistent expectations
    • Learning

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Control and Optimization

    Cite this

    Consistent expectations equilibria and learning in a stock market. / Soegner, Leopold; Mitlöhner, Hans.

    In: Journal of Economic Dynamics and Control, Vol. 26, No. 2, 01.02.2002, p. 171-185.

    Research output: Contribution to journalArticle

    Soegner, Leopold ; Mitlöhner, Hans. / Consistent expectations equilibria and learning in a stock market. In: Journal of Economic Dynamics and Control. 2002 ; Vol. 26, No. 2. pp. 171-185.
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