Preferences, common knowledge and speculative trade

Resumo

We study the proposition that if it is common knowledge that en allocation of assets is ex-ante pareto efficient, there is no further trade generated by new information. The key to this result is that the information partitions and other characteristics of the agents must be common knowledge and that contracts, or asset markets, must be complete. It does not depend on learning, on 'lemons' problems, nor on agreement regarding beliefs and the interpretation of information. The only requirement on preferences is state-additivity; in particular, traders need not be risk-averse. We also prove the converse result that 'no-trade results' imply that traders' preferences can be represented by state-additive utility functions. We analyze why examples of other widely studied preferences (e.g., Schmeidler (1989)) allow 'speculative' trade.

Ficha do documento

Tipo

Estudo

Ano

1990

Instituição

Escola de Pós-Graduação em Economia da FGV

Fonte

Repositório da FGV

Idioma

Inglês

Acesso

Não informado

Identificador

oai:repositorio.fgv.br:10438/417

Temas

Economia

Palavras-chave

EconomiaComércioEspeculação