Uncertainty and risk in financial markets

Econometrica

Volumn 73, Issue 1, 2005, Pages 203-243

  Rigotti, Luca ^a   Shannon, Chris ^b  

^a DUKE UNIVERSITY   (United States)

^b UNIVERSITY OF CALIFORNIA   (United States)

Author keywords

Absence of trade; Determinacy of equilibria; Financial markets; General equilibrium theory; Incomplete preferences; Knightian uncertainty

Indexed keywords

EID: 27744504744     PISSN: 00129682     EISSN: None     Source Type: Journal    
DOI: 10.1111/j.1468-0262.2005.00569.x     Document Type: Review

References (47)

1. ALIPRANTIS, C., AND K. BORDER (1994): Infinite Dimensional Analysis. Berlin: Springer-Verlag.
2. AMERIKS, J., AND S. P. ZELDES (2000): "How Do Household Portfolio Shares Vary with Age?" Discussion Paper, Columbia University.
3. ANDERSON, E. W., L. P. HANSEN, AND T. J. SARGENT (2001): "Robustness, Detection, and the Price of Risk," Discussion Paper, Stanford University.
4. AUMANN, R. J. (1962): "Utility Theory Without the Completeness Axiom," Econometrica, 30, 445-462.
5. _ (1964): "Utility Theory Without the Completeness Axiom: A Correction," Econometrica, 32, 210-212.
6. BEWLEY, T. F. (1986): "Knightian Decision Theory: Part I," Discussion Paper, Cowles Foundation.
7. _ (1987): "Knightian Decision Theory: Part II," Discussion Paper, Cowles Foundation.
8. _ (1989): "Market Innovation and Entrepreneurship: A Knightian View," Discussion Paper, Cowles Foundation.
9. _ (2002): "Knightian Decision Theory: Part I," Decisions in Economics and Finance, 2, 79-110.
10. BILLOT, A., A. CHATEAUNEUF, I. GILBOA, AND J.-M. TALLON (2000): "Sharing Beliefs: Between Agreeing and Disagreeing," Econometrica, 68, 685-694.
11. CHATEAUNEUF, A., R.-A. DANA, AND J.-M. TALLON (2000): "Optimal Risk-Sharing Rules and Equilibria with Choquet Expected Utility," Journal of Mathematical Economics, 34, 191-214.
12. DANA, R.-A. (2000): "Ambiguity, Uncertainty Aversion and Equilibrium Welfare," Discussion Paper, Ceremade.
13. _ (2001): "On Equilibria when Agents Have Multiple Priors," Discussion Paper, Ceremade.
14. DOW, J., AND S. R. WERLANG (1992): "Uncertainty Aversion, Risk Aversion and the Optimal Choice of Portfolio," Econometrica, 60, 197-204.
15. DUBRA, J., F. MACCHERONI, AND E. A. OK (2001): "Expected Utility Theory Without the Completeness Axiom," Discussion Paper, New York University.
16. EINHORN, H. J., AND R. M. HOGARTH (1985): "Ambiguity and Uncertainty in Probabilistic Inference," Psychological Review, 92, 433-461.
17. ELLSBERG, D. (1961): "Risk, Ambiguity, and the Savage Axioms," Quarterly Journal of Economics, 75, 643-669.
18. EPSTEIN, L. G. (2001): "Sharing Ambiguity," American Economic Review, 91, 45-50.
19. EPSTEIN, L. G., AND T. WANG (1994): "Intertemporal Asset Pricing under Knightian Uncertainty," Econometrica, 62, 283-322.
20. EPSTEIN, L. G., AND J. ZHANG (2001): "Subjective Probabilities on Subjectively Unambiguous Events," Econometrica, 69, 265-306.
21. FON, V., AND Y. OTANI (1979): "Classical Welfare Theorems with Non-Transitive and Non-Complete Preferences," Journal of Economic Theory, 2, 409-418.
22. FOX, C. R., AND A. TVERSKY (1995): "Ambiguity Aversion and Comparative Ignorance," Quarterly Journal of Economics, 110, 586-603.
23. GALE, D., AND A. MAS-COLELL (1975): "An Equilibrium Existence Theorem for a General Model Without Ordered Preferences," Journal of Mathematical Economics, 2, 9-15.
24. GHIRARDATO, P., F. MACCHERONI, AND M. MARINACCI (2003): "Differentiating Ambiguity and Ambiguity Attitude," Journal of Economic Theory, forthcoming.
25. GHIRARDATO, P., F. MACCHERONI, M. MARINACCI, AND M. SINISCALCHI (2003): "A Subjective Spin on Roulette Wheels," Econometrica, 71, 1897-1908.
26. GHIRARDATO, P., AND M. MARINACCI (2002): "Ambiguity Made Precise: A Comparative Foundation," Journal of Economic Theory, 102, 251-289.
27. GILBOA, I., AND D. SCHMEIDLER (1989): "Maxmin Expected Utility with Non-Unique Prior," Journal of Mathematical Economics, 18, 141-153.
28. HANSEN, L. P., AND T. J. SARGENT (2001): "Robust Control and Model Uncertainty," Discussion Paper, Stanford University.
29. HANSEN, L. P., T. J. SARGENT, AND T. TALLARINI (1999): "Robust Permanent Income and Pricing," Review of Economic Studies, 66, 873-907.
30. HEATH, C., AND A. TVERSKY (1991): "Preference and Belief: Ambiguity and Competence in Choice Under Uncertainty," Journal of Risk and Uncertainty, 4, 5-28.
31. KNIGHT, F. H. (1921): Uncertainty and Profit. Boston: Houghton Mifflin.
32. LIU, W. F. (1999): "Heterogeneous Agent Economies with Knightian Uncertainty," Discussion Paper, University of Washington.
33. MACHINA, M., AND D. SCHMEIDLER (1992): "A More Robust Definition of Subjective Probability," Econometrica, 60, 745-780.
34. MADRIAN, B. C., AND D. F. SHEA (2001): "The Power of Suggestion: Inertia in 401 (k) Participation and Savings Behavior," Quarterly Journal of Economics, 107, 1149-1187.
35. MAS-COLELL, A. (1974): "An Equilibrium Existence Theorem Without Complete or Transitive Preferences," Journal of Mathematical Economics, 1, 237-246.
36. MUKERJI, S., AND J.-M. TALLON (2001): "Ambiguity Aversion and Incompleteness of Financial Markets," Review of Economic Studies, 68, 883-904.
37. NAU, R. F. (1992): "Indeterminate Probabilities on Finite Sets," The Annals of Statistics, 20, 1737-1767.
38. _ (2003): "The Shape of Incomplete Prefrences," Discussion Paper, Fuqua School of Business, Duke University.
39. NEHRING, K. (1999): "Capacities and Probabilistic Beliefs: A Precarious Coexistence," Mathematical Social Sciences, 38, 197-213.
40. _ (2001): "Ambiguity in the Context of Probabilistic Beliefs," Discussion Paper, UC Davis.
41. RIGOTTI, L., AND C. SHANNON (2003): "Maxmin Expected Utility and Equilibria," Discussion Paper, U.C. Berkeley.
42. SAMUELSON, W., AND R. ZECKHAUSER (1988): "Status quo Bias in Decision Making," Journal of Risk and Uncertainty, 1, 7-59.
43. SCHMEIDLER, D. (1989): "Subjective Probability and Expected Utility Without Additivity," Econometrica, 57, 571-587.
44. SEIDENFELD, T., M. J. SCHERVISH, AND J. B. KADANE (1995): "A Representation of Partially Ordered Preferences," The Annals of Statistics, 23, 2168-2217.
45. SHAFER, W., AND H. SONNENSCHEIN (1975): "Equilibrium in Abstract Economies Without Ordered Preferences," Journal of Mathematical Economics, 2, 345-348.
46. SHAPLEY, L. S., AND M. BAUCELLS (1998): "Multiperson Utility," Discussion Paper, University of California, Los Angeles.
47. TALLON, J.-M. (1998): "Asymmetric Information, Non-Additive Expected Utility and the Information Revealed by Prices: An Example," International Economic Review, 39, 329-342.