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- Title
How helpful is a long memory on financial markets?
- Authors
Güth, Sandra; Ludwig, Sven
- Abstract
Summary. How should portfolio decisions depend on the past? In a simple model with boundedly rational agents we show that there is no universal answer to this question. Both, long and short memory, can be optimal in the appropriate environment. In most cases there is an equilibrium where both dispositions are equally successful. We characterize such equilibria for the case of two assets and two states. For dynamics based on average payoff, equilibria are global attractors whereas discrete choice dynamics in general do not converge to the equilibrium.
- Subjects
ECONOMIC equilibrium; PORTFOLIO management (Investments)
- Publication
Economic Theory, 2000, Vol 16, Issue 1, p107
- ISSN
0938-2259
- Publication type
Article