In this paper, I relax the common assumption of the one-dimensionality of noise made in the standard competitive noisy rational expectations framework. Within an environment characterized by multidimensional noise, I explore the strategic interactions between different traders that are informed...

Do all types of information benefit the efficiency of prices in the sense that they drive them closer to fundamentals compared to the situation where information does not exist? Looking at the competitive noisy rational expectations framework, the clear answer of the literature is: yes. It...

In this paper, I relax the common assumption of the one-dimensionality of noise made in the standard noisy rational expectations framework. Within an environment characterized by multidimensional noise, I explore the strategic interactions between different traders that are informed about...

Guided by a price-volume probability wave differential equation in a new mathematical method, we study intraday market dynamic equilibrium in stock market. We select intraday cumulative trading volume distribution over a price range for individual mental representation and determine a price...

I assume that a market maker selects a buy and a sell price at her exchange to maximize profits. Up to first-order approximation, this problem is equivalent to a social planner’s problem and the problem of maximizing trader participation in the exchange. The optimal market maker rule has...

This paper proves that the (negative) certainty equivalent (CE) in reference-dependent decision theories (such as Prospect Theory) always satisfies the well-known axiomatic characterisation of a monetary risk measure, although in rational Expected Utility Theory this only holds in special cases....

The approximate agents' wealth and price invariant densities of the prediction market model presented in Kets et al.(2014) is derived using the Fokker-Planck equation of the associated continuous-time jump process. We show that the approximation obtained from the evolution of log-wealth...

We investigate market selection and bet pricing in a simple Arrow security economy which we show is equivalent to the repeated prediction market models studied in the literature. We derive the condition for long run survival of more than one agent (the crowd) and quantify the information content...

The behavioural finance literature attributes the persistent market misvaluation observed in real data to the presence of deviations from rational thinking of the actors involved. Cognitive biases and the use of simple heuristics can be described using expected utility maximising agents that...

We consider an exchange economy with heterogeneous agents and multiple assets and investigate the coupled dynamics of assets' prices and agents' wealth. We assume that agents have heterogeneous beliefs and invest on each asset a fraction of wealth proportional to its expected dividends. Our main...