Communication, correlation of beliefs and asset price fluctuations

Name: Communication, correlation of beliefs and asset price fluctuations
Brand: Vita e Pensiero
Price: 6.00 EUR
Availability: OnlineOnly

digital

Article

Magazine

RIVISTA INTERNAZIONALE DI SCIENZE SOCIALI

Issue

RIVISTA INTERNAZIONALE DI SCIENZE SOCIALI - 2007 - 3

Title

Communication, correlation of beliefs and asset price fluctuations

Author

Hiroyuki Nakata

Publisher

Vita e Pensiero

Format

Article |

Pdf

Pages

Online from

03-2007

Issn

0035-676X (print) | 1827-7918 (digital)

€ 6.00

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Description

This paper studies how communication amongst agents influences the equilibrium of a financial economy. We set up a standard overlapping generations (OLG) model with assets, while allowing for heterogeneous beliefs. The paper explicitly describes how communication generates correlation of beliefs, and show that communication can be embedded in the models of rational beliefs that do not model communication explicitly a priori. We confine our attention to a Markovian economy, in which the beliefs of the agents are all Markovian. Simulation results are provided to examine the effects of communication, while classifying the beliefs in accord to the reactions to communication.