Betting under subjective uncertainty
Gierlinger, Johannes ![ORCID Identifier](/img/uab/orcid.ico)
(Universitat Autònoma de Barcelona.)
MOVE - Markets, Organizations and Votes in Economics
Date: |
2015 |
Description: |
28 pàg. |
Abstract: |
This paper shows that uncertainty-averse agents may trade extrinsic variables on efficient markets. The finding is robust to identical beliefs and strictly convex preferences. Conditional on a realization of fundamentals, the distribution of an otherwise irrelevant variable may depend on the underlying probability regime. This dependence cannot be exploited through trade on fundamentals. I provide necessary and sufficient conditions for the irrelevance of non-fundamental variables undermaxmin, smooth, and variational preferences. These conditions are found to be stringent, except formultiplier preferences (Hansen and Sargent, 2001; Strzalecki, 2011), for which it suffices that the reference priors agree conditional on fundamentals. |
Grants: |
Ministerio de Ciencia e Innovación ECO2009-09847 European Research Council 230589
|
Rights: |
Tots els drets reservats. ![](/img/licenses/InC.ico) |
Language: |
Anglès |
Document: |
Working paper ; recerca |
Subject: |
Uncertainty ;
Sunspots ;
Consumption risk ;
Variance swaps |
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Record created 2024-06-01, last modified 2024-07-17