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Speculative Trade and the Value of Public Information

Galanis, S. ORCID: 0000-0003-4286-7449 (2019). Speculative Trade and the Value of Public Information (20/04). London, UK: City, University of London.

Abstract

In environments with expected utility, it has long been established that speculative trade cannot occur (Milgrom and Stokey [1982]), and that the value of public information is negative in economies with risk-sharing and no aggregate uncertainty (Hirshleifer [1971], Schlee [2001]). We show that these results are still true even if we relax expected utility, so that either Dynamic Consistency (DC) or Consequentialism is violated. We characterise no speculative trade in terms of a weakening of DC and find that Consequentialism is not required. Moreover, we show that a weakening of both DC and Consequentialism is sufficient for the value of public information to be negative. We therefore generalise these important results for convex preferences which contain several classes of ambiguity averse preferences.

Publication Type: Monograph (Discussion Paper)
Additional Information: © The Authors
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HF Commerce
Departments: School of Arts & Social Sciences > Economics
School of Arts & Social Sciences > Economics > Discussion Paper Series
Date Deposited: 24 Jan 2020 14:05
URI: https://openaccess.city.ac.uk/id/eprint/23528
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