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Rational bubbles under diverse information

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  • Dahai Yu

Abstract

This paper uses a set of post-extraction information trees to generally model diverse information and agent specific state price processes to define present and fundamental values. It shows that there can be no negative or finite bubbles and that, if agents are impatient and the aggregate endowment has a finite present value under some state price process of some agent, then there can be no bubble under this state price process for any asset with positive supply.

Suggested Citation

  • Dahai Yu, 1998. "Rational bubbles under diverse information," International Finance Discussion Papers 621, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgif:621
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    File URL: http://www.federalreserve.gov/pubs/ifdp/1998/621/default.htm
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    References listed on IDEAS

    as
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    Cited by:

    1. Fernando Díaz & Rodrigo Sánchez, 2001. "Acciones Tecnológicas: ¿Un Episodio De Burbujas Especulativas En El Mercado?," Abante, Escuela de Administracion. Pontificia Universidad Católica de Chile., vol. 4(1), pages 37-82.
    2. Bidian, Florin, 2015. "Portfolio constraints, differences in beliefs and bubbles," Journal of Mathematical Economics, Elsevier, vol. 61(C), pages 317-326.

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    Keywords

    Information theory; Econometrics;

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