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
Central Eastern Europe
Rational expectations models

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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