Endogenous Uncertainty and Market Volatility
Copyright policy )Endogenous Uncertainty and Market Volatility
This model is based on the theory of rational beliefs and rational belief equilibrium developed in 1994, 1997 by M. Kurz. Those theories were developed with the view of studying the effects of the beliefs of economic agents on the volatility of economic variables and on social risk. We also examine that the idea of the `equity premium puzzle' can be resolved using the rational beliefs theory. This paper presents a verified framework for the study of market volatility. It argues that the distribution of beliefs is the central volatility propagation mechanism in the market. This paper also studies the effect of the correlation of beliefs among investors. It show that the main effect of such correlation is the dynamic patter as of asset prices and returns and is hence important for studying such phenomena as stochastic volatility.
- University of Milan Italy
- Catholic University of the Sacred Heart Italy
- Stanford University United States
GARCH, Forward Discount Bias., market volatility, Rational Expectations, Rational Beliefs, Rational Belief Equilibrium (RBE), Endogenous Uncertainty, states of belief, stock price, discount bond, equity premium, market volatility, GARCH, Forward Discount Bias, Foreign exchange markets, States of belief, Discount bond, Empirical distribution, Stationary measure, Stable dynamical system, Auctions, bargaining, bidding and selling, and other market models, Equity premium, Market Optimism and Pessimism, Risikoprämie, Diversity of Beliefs, Risiko, Rational Belief Equilibrium (RBE), Market Volatility, G12, Rational Belief Equilibrium, USA, Regime Variables, Rational Expectations, Rational Beliefs, Endogenous uncertainty, ddc:330, Market volatility, Microeconomic theory (price theory and economic markets), Börsenkurs, Equity Premium Puzzle, Volatilität, correlation of beliefs among investors, Stock price, Garch, States of Beliefs, D84, Rationale Erwartung, beliefs, Rational Expectations, Rational Beliefs, Rational Belief Equilibrium (RBE), Endogenous uncertainty, States of belief, Stock price, Discount bond, Equity premium, Market volatility, GARCH, Forward Discount Bias., Forward discount bias, Theorie, D5, jel: jel:D84, jel: jel:G12, jel: jel:D5
GARCH, Forward Discount Bias., market volatility, Rational Expectations, Rational Beliefs, Rational Belief Equilibrium (RBE), Endogenous Uncertainty, states of belief, stock price, discount bond, equity premium, market volatility, GARCH, Forward Discount Bias, Foreign exchange markets, States of belief, Discount bond, Empirical distribution, Stationary measure, Stable dynamical system, Auctions, bargaining, bidding and selling, and other market models, Equity premium, Market Optimism and Pessimism, Risikoprämie, Diversity of Beliefs, Risiko, Rational Belief Equilibrium (RBE), Market Volatility, G12, Rational Belief Equilibrium, USA, Regime Variables, Rational Expectations, Rational Beliefs, Endogenous uncertainty, ddc:330, Market volatility, Microeconomic theory (price theory and economic markets), Börsenkurs, Equity Premium Puzzle, Volatilität, correlation of beliefs among investors, Stock price, Garch, States of Beliefs, D84, Rationale Erwartung, beliefs, Rational Expectations, Rational Beliefs, Rational Belief Equilibrium (RBE), Endogenous uncertainty, States of belief, Stock price, Discount bond, Equity premium, Market volatility, GARCH, Forward Discount Bias., Forward discount bias, Theorie, D5, jel: jel:D84, jel: jel:G12, jel: jel:D5
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