Chapter 5. Heterogeneity, Market Mechanisms, and Asset Price Dynamics
- Introduction 279
- Heterogeneity and Market-Clearing Mechanisms 283
- Portfolio Optimization 283
- Utility Functions 284
- Market-Clearing Mechanisms 285
- Noise 287
- Expectations Feedback 287
- Price Dynamics Implied by the CARA Utility Function 288
- Fundamental Price and the Optimal Demand 288
- Formation of Heterogeneous Beliefs 289
- Performance Measure and Switching 290
- Price Behavior under the Walrasian Auctioneer Mechanism 291
- Price Behavior under the Market-Maker Mechanism 298
- Price behavior and Wealth Dynamics Implied by the CRRA Utility 302
- Optimal Portfolio and Wealth Dynamics 302
- Price and Wealth Behavior with a Walrasian Auctioneer 303
- Price and Wealth Behavior with a Market Maker ...
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