Arnold, Lutz G. (2009) Anything is Possible: On the Existence and Uniqueness of Equilibria in the Shleifer-Vishny Model of Limits of Arbitrage. REVIEW OF FINANCE, 13 (3). pp. 521-553. ISSN 1572-3097, 1573-692X
Full text not available from this repository.Abstract
This paper characterizes equilibria in the Shleifer-Vishny model of limits of arbitrage. To prove existence, one has to consider types of equilibria ignored by Shleifer and Vishny, even if one adopts their parameter restrictions. For example, the only equilibrium may be one in which maximization of expected wealth requires an "all-or-nothing" investment strategy, with intermediate investment levels being strictly unprofitable. If one goes beyond Shleifer and Vishny's parameter restrictions, multiple equilibria may arise, and equilibrium selection may be governed by sunspots. Moreover, there may exist an equilibrium in which the asset price returns to fundamentals despite worsening noise trader sentiment.
| Item Type: | Article |
|---|---|
| Uncontrolled Keywords: | ; G12 |
| Subjects: | 300 Social sciences > 330 Economics |
| Divisions: | Business, Economics and Information Systems > Institut für Volkswirtschaftslehre und Ökonometrie > Lehrstuhl für Theoretische Volkswirtschaft (Prof. Dr. Lutz Arnold) |
| Depositing User: | Dr. Gernot Deinzer |
| Date Deposited: | 14 Sep 2020 06:21 |
| Last Modified: | 14 Sep 2020 06:21 |
| URI: | https://pred.uni-regensburg.de/id/eprint/28800 |
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