IDEAS home Printed from https://ideas.repec.org/p/wrk/wcreta/01.html
   My bibliography  Save this paper

The identification of beliefs from asset demand

Author

Listed:
  • Kubler, Felix

    (IBF, University of Zurich and Swiss Finance Institute)

  • Polemarchakis, Herakles

    (Department of Economics, University of Warwick)

Abstract

The demand for assets as prices and initial wealth vary identifies beliefs and attitudes towards risk. We derive conditions that guarantee identification with no knowledge either of the cardinal utility index or of the distribution of future endowments or payoffs of assets ; the argument applies even if the asset market is incomplete and demand is observed only locally.

Suggested Citation

  • Kubler, Felix & Polemarchakis, Herakles, 2015. "The identification of beliefs from asset demand," CRETA Online Discussion Paper Series 01, Centre for Research in Economic Theory and its Applications CRETA.
    • Handle: RePEc:wrk:wcreta:01
    as

    Download full text from publisher

    File URL: https://warwick.ac.uk/fac/soc/economics/research/centres/creta/papers/manage/01-the_identification_of_beliefs_from_asset_demand.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Robert J. Shiller, 2015. "Irrational Exuberance," Economics Books, Princeton University Press, edition 3, number 10421.
    2. Philip Dybvig & Heraklis Polemarchakis, 1981. "Recovering Cardinal Utility," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 48(1), pages 159-166.
    3. Kubler, F. & Chiappori, P. -A. & Ekeland, I. & Polemarchakis, H. M., 2002. "The Identification of Preferences from Equilibrium Prices under Uncertainty," Journal of Economic Theory, Elsevier, vol. 102(2), pages 403-420, February.
    4. Steve Ross, 2015. "The Recovery Theorem," Journal of Finance, American Finance Association, vol. 70(2), pages 615-648, April.
    5. Federico Echenique & Kota Saito, 2015. "Savage in the Market," Econometrica, Econometric Society, vol. 83(4), pages 1467-1495, July.
    6. Felix Kubler & Larry Selden & Xiao Wei, 2014. "Asset Demand Based Tests of Expected Utility Maximization," American Economic Review, American Economic Association, vol. 104(11), pages 3459-3480, November.
    7. Varian, Hal R., 1983. "Nonparametric Tests of Models of Investor Behavior," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 18(3), pages 269-278, September.
    8. Mas-Colell, Andreu, 1977. "The Recoverability of Consumers' Preferences from Market Demand Behavior," Econometrica, Econometric Society, vol. 45(6), pages 1409-1430, September.
    9. Chiappori, P. -A. & Ekeland, I. & Kubler, F. & Polemarchakis, H. M., 2004. "Testable implications of general equilibrium theory: a differentiable approach," Journal of Mathematical Economics, Elsevier, vol. 40(1-2), pages 105-119, February.
    10. Chiappori, P. A. & Ekeland, I., 2004. "Individual excess demands," Journal of Mathematical Economics, Elsevier, vol. 40(1-2), pages 41-57, February.
    11. repec:dau:papers:123456789/13505 is not listed on IDEAS
    12. Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-1445, November.
    13. Jaroslav Borovička & Lars Peter Hansen & José A. Scheinkman, 2016. "Misspecified Recovery," Journal of Finance, American Finance Association, vol. 71(6), pages 2493-2544, December.
    14. Dybvig, Philip H & Rogers, L C G, 1997. "Recovery of Preferences from Observed Wealth in a Single Realization," The Review of Financial Studies, Society for Financial Studies, vol. 10(1), pages 151-174.
    15. Polemarchakis, H. M., 1983. "Observable probabilistic beliefs," Journal of Mathematical Economics, Elsevier, vol. 11(1), pages 65-75, January.
    16. Polemarchakis, H. M., 1979. "Is there an income effect?," Journal of Economic Theory, Elsevier, vol. 21(3), pages 380-388, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Anastasia Burkovskaya, 2022. "A model of state aggregation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 73(1), pages 121-149, February.
    2. Gorno, Leandro, 2019. "Revealed preference and identification," Journal of Economic Theory, Elsevier, vol. 183(C), pages 698-739.
    3. Kubler, Felix & Selden, Larry & Wei, Xiao, 2020. "Incomplete market demand tests for Kreps-Porteus-Selden preferences," Journal of Economic Theory, Elsevier, vol. 185(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Polemarchakis, Herakles & Selden, Larry & Song, Xinxi, 2017. "The identification of attitudes towards ambiguity and risk from asset demand," CRETA Online Discussion Paper Series 28, Centre for Research in Economic Theory and its Applications CRETA.
    2. Kubler, Felix & Selden, Larry & Wei, Xiao, 2020. "Incomplete market demand tests for Kreps-Porteus-Selden preferences," Journal of Economic Theory, Elsevier, vol. 185(C).
    3. Kubler, F. & Chiappori, P. -A. & Ekeland, I. & Polemarchakis, H. M., 2002. "The Identification of Preferences from Equilibrium Prices under Uncertainty," Journal of Economic Theory, Elsevier, vol. 102(2), pages 403-420, February.
    4. Dillschneider, Yannick & Maurer, Raimond, 2019. "Functional Ross recovery: Theoretical results and empirical tests," Journal of Economic Dynamics and Control, Elsevier, vol. 108(C).
    5. Chambers, Christopher P. & Liu, Ce & Martinez, Seung-Keun, 2016. "A test for risk-averse expected utility," Journal of Economic Theory, Elsevier, vol. 163(C), pages 775-785.
    6. Barone-Adesi, Giovanni & Fusari, Nicola & Mira, Antonietta & Sala, Carlo, 2020. "Option market trading activity and the estimation of the pricing kernel: A Bayesian approach," Journal of Econometrics, Elsevier, vol. 216(2), pages 430-449.
    7. Escanciano, Juan Carlos & Hoderlein, Stefan & Lewbel, Arthur & Linton, Oliver & Srisuma, Sorawoot, 2021. "Nonparametric Euler Equation Identification And Estimation," Econometric Theory, Cambridge University Press, vol. 37(5), pages 851-891, October.
    8. Fernández-Villaverde, Jesús & Levintal, Oren, 2024. "The Distributional Effects of Asset Returns," CEPR Discussion Papers 18855, C.E.P.R. Discussion Papers.
    9. Borovička, Jaroslav & Stachurski, John, 2021. "Stability of equilibrium asset pricing models: A necessary and sufficient condition," Journal of Economic Theory, Elsevier, vol. 193(C).
    10. Carvajal, Andres & Ray, Indrajit & Snyder, Susan, 2004. "Equilibrium behavior in markets and games: testable restrictions and identification," Journal of Mathematical Economics, Elsevier, vol. 40(1-2), pages 1-40, February.
    11. Le Grand, François, 2019. "Perron–Frobenius theory recovers more than you might think: The example of limited participation," Economics Letters, Elsevier, vol. 174(C), pages 186-188.
    12. Cherchye, Laurens & Demuynck, Thomas & De Rock, Bram & Freer, Mikhail, 2022. "Revealed preference analysis of expected utility maximization under prize-probability trade-offs," Journal of Mathematical Economics, Elsevier, vol. 99(C).
    13. Kiriu, Takuya & Hibiki, Norio, 2024. "The impact of macroeconomic announcements on risk, preference, and risk premium," International Review of Economics & Finance, Elsevier, vol. 93(PB), pages 842-857.
    14. Andrés Carvajal & Alvaro Riascos, 2004. "Global identification from the equilibrium manifold under incomplete markets," Royal Holloway, University of London: Discussion Papers in Economics 04/30, Department of Economics, Royal Holloway University of London, revised Nov 2004.
    15. Andrés Carvajal & Alvaro Riascos, 2005. "The Identification Of Preferences From Market Data Under Uncertainty," Documentos CEDE 3599, Universidad de los Andes, Facultad de Economía, CEDE.
    16. Marek Weretka, 2019. "Normative inference in efficient markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 68(4), pages 787-810, November.
    17. Sanford, Anthony, 2024. "Information content of option prices: Comparing analyst forecasts to option-based forecasts," The North American Journal of Economics and Finance, Elsevier, vol. 73(C).
    18. Clain-Chamosset-Yvrard, Lise, 2021. "Expectation-Driven Asset Price Fluctuations Under The Spirit Of Capitalism Hypothesis: The Role Of Heterogeneity," Macroeconomic Dynamics, Cambridge University Press, vol. 25(2), pages 509-535, March.
    19. Anastasia Burkovskaya, 2022. "A model of state aggregation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 73(1), pages 121-149, February.
    20. Jensen, Christian Skov & Lando, David & Pedersen, Lasse Heje, 2019. "Generalized recovery," Journal of Financial Economics, Elsevier, vol. 133(1), pages 154-174.

    More about this item

    Keywords

    asset prices ; beliefs ; attitudes towards risk JEL Classification Numbers: D80 ; G10;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wrk:wcreta:01. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Margaret Nash (email available below). General contact details of provider: https://edirc.repec.org/data/dewaruk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.