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- Title
Consensus Beliefs Equilibrium and Market Efficiency.
- Authors
EASLEY, DAVID; JARROW, ROBERT A.
- Abstract
This paper presents an analysis of the concept of consensus beliefs and its relation to market efficiency. We show that unless traders have rational expectations, the two published interpretations of consensus beliefs are not useful for considerations of market efficiency. One interpretation (see Verrecchia [6]) has no implication for market efficiency. Under the second interpretation (see Verrecchia [7, 8]) consensus beliefs equilibria are efficient, but they typically do not exist unless traders have rational expectations.
- Subjects
RATIONAL expectations (Economic theory); MARKET equilibrium; CONSENSUS (Social sciences); MICROECONOMICS; EFFICIENT market theory; ECONOMIC forecasting; ECONOMIC equilibrium; HETEROGENEITY; INFORMATION theory in economics; INDUSTRIAL organization (Economic theory)
- Publication
Journal of Finance (Wiley-Blackwell), 1983, Vol 38, Issue 3, p903
- ISSN
0022-1082
- Publication type
Article
- DOI
10.1111/j.1540-6261.1983.tb02509.x