Kurz, Mordecai; Motolese, Maurizio - Fondazione ENI Enrico Mattei (FEEM) - 1999
by the beliefs and actions of agents. The theory of Rational Belief (see Kurz [1994]) permits rational agents to hold … diverse beliefs and consequently, a Rational Belief Equilibrium (in short, RBE) may exhibit diverse patterns of Endogenous … Uncertainty. This paper shows that most of the observed volatility in financial markets is generated by the beliefs of the agents …