New Micro-foundations for Macroeconomics
"Financial Markets: Efficiency, Stability"
Sayantal Ghosal (Warwick) Saturday 11 July, 11.45 - 12.30
Abstract
The paper will construct a model where there is a trade-off between efficiency and stability when individuals trade in financial markets. Achieving efficiency requires the use of trading strategies that are sensitive to precise forecasts about future prices. However, the use of such strategies, combined with deviations from perfect foresight, ensures that convergence to a perfect foresight equilibrium is harder to achieve.