Evolution of wealth and asset prices in markets with case-based investors

Guerdjikova, Ani

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URL:	http://ub-madoc.bib.uni-mannheim.de/2693
URN:	urn:nbn:de:bsz:180-madoc-26935
Document Type:	Working paper
Year of publication:	2004
The title of a journal, publication series:	None
Publication language:	English
Institution:	School of Law and Economics > Sonstige - Fakultät für Rechtswissenschaft und Volkswirtschaftslehre
MADOC publication series:	Sonderforschungsbereich 504 > Rationalitätskonzepte, Entscheidungsverhalten und ökonomische Modellierung (Laufzeit 1997 - 2008)
Subject:	330 Economics
Classification:	JEL: G11 D81 G12 ,
Subject headings (SWD):	Börsenkurs , Anlageverhalten , Entscheidung , Erwarteter Nutzen , Kapitalmarkttheorie
Keywords (English):	asset pricing , bubbles , volatility , case-based decision theory , evolution
Abstract:	I analyze whether case-based decision makers (CBDM) can survive in an assetmarket in the presence of expected utilitymaximizers. Conditions are identified, under which the CBDM retain a positive mass with probability one. CBDM can cause predictability of asset returns, high volatility and bubbles. It is found that the expected utility maximizers can disappear from the market for a finite period of time, if the mispricing of the risky asset caused by the case-based decision-makers aggravates too much. Only in the case of logarithmic expected utility maximizers do the case-based decision makers disappear from the market for all parameter values.
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BASE: Guerdjikova, Ani

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