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Perfect equilibrium and lexicographic beliefs

โœ Scribed by Srihari Govindan; Tilman Klumpp


Publisher
Springer-Verlag
Year
2003
Tongue
English
Weight
301 KB
Volume
31
Category
Article
ISSN
0020-7276

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We study equilibrium security price dynamics in an economy where nonfundamental risk arises from agents' heterogeneous beliefs about extraneous processes. We completely characterize equilibrium in terms of the economic primitives, via a representative agent with stochastic weights. Besides pricing f