Rational bubbles under diverse information
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.
File(s): File format is text/html http://www.federalreserve.gov/pubs/ifdp/1998/621/default.htm
File(s): File format is application/pdf http://www.federalreserve.gov/pubs/ifdp/1998/621/ifdp621.pdf
Part of Series: International Finance Discussion Papers
Publication Date: 1998