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Shaheen Seedat and Alexander Zimper |
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''Existence of speculative bubbles when time-horizons are finite'' |
( 2012, Vol. 32 No.1 ) |
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This note extends the existing literature on speculative bubbles by allowing for arbitrary trading sequences. As our main result we prove that bubbles may exist in a myopic rational expectations equilibrium (Radner 1979) if and only if every agent expects infinitely many trading opportunities to exist. For finite horizons our finding implies the possible existence of bubbles under the plausible bounded rationality condition that every agent believes he will not end-up with holding the asset when the bubble bursts. |
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Keywords: Speculative behavior, bounded rationality, Lebesgue integral |
JEL: D8 - Information, Knowledge, and Uncertainty: General |
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Manuscript Received : Oct 05 2011 | | Manuscript Accepted : Jan 20 2012 |
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