How equilibrium prices reveal information in a time series model with disparately informed, competitive traders

• 成果类型: Article
• 署名作者: Walker, Todd B.
• 署名单位: Indiana University System; Indiana University Bloomington
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2007.01.011
• 发表日期: 2007
• 页码: 512-537
• 关键词: Asset pricing; asymmetric information; higher-order beliefs

摘要

Accommodating asymmetric information in a dynamic asset pricing model is technically challenging due to the problems associated with higher-order expectations. That is, rational investors are forced into a situation where they must forecast the forecasts of other agents. In a dynamic setting, this problem telescopes into the infinite future and the dimension of the relevant state space approaches infinity. By using the frequency domain approach of Whiteman [Linear Rational Expectations Models: A User's Guide, University of Minnesota Press, Minneapolis, 19831 and Kasa [Forecasting the forecasts of others in the frequency domain, Rev. Econ. Dynam. 3 (2000) 726-756], this paper demonstrates how information structures previously believed to preserve asymmetric information in equilibrium, converge to a symmetric information, rational expectations equilibrium. The revealing aspect of the price process lies in the invertibility of the observed state space, which makes it possible for agents to infer the economically fundamental shocks and thus eliminating the need to forecast the forecasts of others. (c) 2007 Elsevier Inc. All rights reserved.