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| Maik Heinemann |
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| ''Stability under learning of equilibria in financial markets with supply information'' |
| ( 2010, Vol. 30 No.1 ) |
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| 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. |
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| Keywords: Recursive Least Squares Learning, Eductive Stability, Rational Expectations, Private Information |
JEL: D8 - Information, Knowledge, and Uncertainty: General
C6 - Mathematical Methods and Programming: General |
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| Manuscript Received : Dec 01 2009 | | Manuscript Accepted : Jan 28 2010 |
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