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| Author: | Kraus, A. Smith, M. |
| Title: | Endogenous sunspots, pseudo-bubbles, and belief about beliefs |
| Journal: | Journal of Financial Markets
1998 : AUG, VOL. 1:2, p. 151-174 |
| Index terms: | STOCK MARKETS FINANCE MODELS |
| Language: | eng |
| Abstract: | The authors analyze a simple sunspot model that represents a standard securities market without sidebeds on an exogenous sunspot event. The multiple self-fulfilling equilibria that arise in the model are based on investors' beliefs. Hence, these multiple equilibria are "endogenous sunspots". The authors show that endogenous sunspots can arise even with complete markets to which all investors have access and homogeneous beliefs, provided the homogeneity is not common knowledge. |
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