Stability under learning of equilibria in financial markets with supply information

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Stability under learning of equilibria in financial markets with supply information. / Heinemann, Maik.
In: Economics Bulletin, Vol. 30, No. 1, 2010, p. 383-391.

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@article{06b42cfdd0aa40adb80884cea628f252,
title = "Stability under learning of equilibria in financial markets with supply information",
abstract = "In a recent paper Ganguli/Yang (2009) demonstrate, that there can exist multiple equilibria in a financial market model a' la Grossman/Stiglitz (1980) if traders possess private information regarding the supply of the risky asset. The additional equilibria differ in some important respects from the usual equilibrium of the Grossman-Stiglitz type which still exists in this model. This note shows that these additional equilibria are always unstable under eductive learning (cf. Guesnerie (2002)) and adaptive learning via least-squares estimation (cf. Marcet/Sargent (1988) or Evans/Honkapohja (2001)). Regarding the original Grossman-Stiglitz type equilibrium, the stability results are less clear cut, since this equilibrium might be unstable under eductive learning while it is always stable under adaptive learning.",
keywords = "Economics",
author = "Maik Heinemann",
year = "2010",
language = "English",
volume = "30",
pages = "383--391",
journal = "Economics Bulletin",
issn = "1545-2921",
publisher = "University of Illinois",
number = "1",

}

RIS

TY - JOUR

T1 - Stability under learning of equilibria in financial markets with supply information

AU - Heinemann, Maik

PY - 2010

Y1 - 2010

N2 - In a recent paper Ganguli/Yang (2009) demonstrate, that there can exist multiple equilibria in a financial market model a' la Grossman/Stiglitz (1980) if traders possess private information regarding the supply of the risky asset. The additional equilibria differ in some important respects from the usual equilibrium of the Grossman-Stiglitz type which still exists in this model. This note shows that these additional equilibria are always unstable under eductive learning (cf. Guesnerie (2002)) and adaptive learning via least-squares estimation (cf. Marcet/Sargent (1988) or Evans/Honkapohja (2001)). Regarding the original Grossman-Stiglitz type equilibrium, the stability results are less clear cut, since this equilibrium might be unstable under eductive learning while it is always stable under adaptive learning.

AB - In a recent paper Ganguli/Yang (2009) demonstrate, that there can exist multiple equilibria in a financial market model a' la Grossman/Stiglitz (1980) if traders possess private information regarding the supply of the risky asset. The additional equilibria differ in some important respects from the usual equilibrium of the Grossman-Stiglitz type which still exists in this model. This note shows that these additional equilibria are always unstable under eductive learning (cf. Guesnerie (2002)) and adaptive learning via least-squares estimation (cf. Marcet/Sargent (1988) or Evans/Honkapohja (2001)). Regarding the original Grossman-Stiglitz type equilibrium, the stability results are less clear cut, since this equilibrium might be unstable under eductive learning while it is always stable under adaptive learning.

KW - Economics

M3 - Journal articles

VL - 30

SP - 383

EP - 391

JO - Economics Bulletin

JF - Economics Bulletin

SN - 1545-2921

IS - 1

ER -

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