Incomplete Information and Heterogeneous Beliefs in Continuous-time Finance (Hardcover, 2003 ed.)

This book considers the impact of incomplete information and heterogeneous beliefs on investor's optimal portfolio and consumption behavior and equilibrium asset prices. After a brief review of the existing incomplete information literature, the effect of incomplete information on investors' exptected utility, risky asset prices, and interest rates is described. It is demonstrated that increasing the quality of investors' information need not increase their expected utility and the prices of risky assets. The impact of heterogeneous beliefs on investors' portfolio and consumption behavior and equilibrium asset prices is shown to be non-trivial. Heterogeneous beliefs can explain a number of observed phenomena, such as the fact that equilibrium state-price densities are not log-normal, the "smile" in option implied volatility, and the patterns of implied risk aversion reported recently in the literature. It is also demonstrated that financial markets in general do not aggregate information efficiently, a fact that can explain the equity premium puzzle.

General

Imprint:	Springer-Verlag
Country of origin:	Germany
Series:	Springer Finance
Release date:	February 2003
First published:	2003
Authors:	Alexandre C. Ziegler
Dimensions:	235 x 155 x 14mm (L x W x T)
Format:	Hardcover
Pages:	198
Edition:	2003 ed.
ISBN-13:	978-3-540-00344-1
Categories:	Books > Business & Economics > Business & management > General Books > Business & Economics > Finance & accounting > Finance > General Books > Money & Finance > General
LSN:	3-540-00344-4
Barcode:	9783540003441

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