In previous models of rational belief equilibria (RBE), individual states of belief were the foundation for the construction of the endogenous state space where individual states of belief were described with the method of assessment variables. This leads to a lack of "anonymity" where the...

The purpose of this paper is to provide a non-technical exposition of the main conclusions of the theory of Rational Belief Equilibrium (RBE) for market volatility. It is argued that the theory of Rational Belief Equilibria (RBE) provides a unified paradigm for explaining market volatility by...

The Equity risk-premium and volatility puzzles: Is it possible to have a high-equity premium and a low risk-free rate, and a high volatile stock return, have received a great deal of attention but beyond this, the fundamental issues are the following: What are the economic representations that...

In a pure-exchange, continuous-time economy, agents, who have different subjective discount rates and heterogenous beliefs on the fundamentals, trade with each other motivated not only by the benefit of risk sharing but also by speculation. This aggressiveness in trading can increase stock price...

This paper extends the Lucas (1978) model to a setting in which investors have heterogeneous beliefs about the structure of a dividend process. By assuming that all investors have logarithmic preferences and different subjective discount rates, we can obtain a closed-form representation of the...

The Equity risk-premium and volatility puzzle - is it possible to have a high equity premium and a low risk-free rate with a plausible risk aversion- have received a great deal of attention but beyond this question, the fundamental issues of that puzzle are the followings: what are the economic...

We investigate the effect of gender on the price deviation (bubble) from the fundamental value in a learning-to-forecast experiment. Our results show that gender plays a more prominent role in markets with positive expectation feedback than in markets with negative feedback. In both types of...

September 4, 1997 <p> We review the issues related to the formulation of endogenous uncertainty in rational belief equilibria(RBE). In all previous models of RBE, individual states of belief were the foundation for the construction of the endogenous state space where individual states of belief...</p>

September 9, 1997 (Updated November 28, 1998) <p> The theory of Rational Belief Equilibria (RBE) offers a unified paradigm for explaining market volatility by the effect of "Endogenous Uncertainty" on financial markets. This uncertainty is propagated within the economy (hence "endogenous") by the...</p>