International Finance Discussion Papers (IFDP)
September 1998
Rational Bubbles under Diverse Information
Dahai Yu
Abstract:
This paper uses a set of post-extraction information trees to generally model diverse information and agent specific state price processes to define present and fundamental values. It shows that there can be no negative or finite bubbles and that, if agents are impatient and the aggregate endowment has a finite present value under some state price process of some agent, then there can be no bubble under this state price process for any asset with positive supply.
Full paper (723 KB Postscript)Keywords: Bubbles, asset pricing, information
PDF: Full Paper
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