This paper analyzes the expected life-time utility and the hedging demands in an exchange only, representative agent general equilibrium under incomplete information. We derive an expression for the investor's expected life-time utility, and analyze his hedging demands for intertemporal changes...

In contrast to the efficient-market hypothesis (EMH), the noisy-market hypothesis (NMH) asserts that prices are but noisy indications of fundamental values. We study losses in certainty equivalents of investing according to one hypothesis (NMH or EMH) when the other is true. Our findings suggest...

In this paper, a model of bounded rational investors investing their portfolio in a passive investment vehicle (e.g., an Exchange Traded Fund replicating a broad index) or an actively managed fund is presented. The model proposes that the quick reswitching of these short-term oriented investors...