Articles scientifiques

Belief-free Equilibria in Repeated Games

J. Ely, J. HÖRNER, W. Olszewski


mars-mai 2005, vol. 73, n°2, pp.377-415

Départements : Finance

We introduce a class of strategies that generalizes examples constructed in two-player games under imperfect private monitoring. A sequential equilibrium is belief-free if, after every private history, each player's continuation strategy is optimal independently of his belief about his opponents' private histories. We provide a simple and sharp characterization of equilibrium payoffs using those strategies. While such strategies support a large set of payoffs, they are not rich enough to generate a folk theorem in most games besides the prisoner's dilemma, even when noise vanishes

Fiscal policy and economic growth: The role of financial intermediation


Review of International Economics

août 2005, vol. 13, n°3, pp.612-629

Départements : Finance

This paper analyzes the impact of public debt on financial efficiency in an overlapping-generations model. We argue that public debt may reduce intermediation costs by increasing the collateral of entrepreneurs. This effect is stronger, the stronger the non-Ricardian component of public debt, i.e. the more it is associated with intergenerational redistribution. This effect can be interpreted as future generations acting as a guarantee for the loans provided to the entrepreneurs of the current generation. Furthermore, multiple growth paths may arise as low taxes increase private collateral, which in turn boosts growth via financial efficiency, while higher growth allows to maintain the same debt/GDP ratio with reduced taxes

Incomplete-market dynamics in a neoclassical production economy

G. Angeletos, L. E. CALVET

Journal of Mathematical Economics

août 2005, vol. 41, n°4/5, pp.407-438

Départements : Finance, GREGHEC (CNRS)

We investigate a neoclassical economy with heterogeneous agents, convex technologies and idiosyncratic production risk. Combined with precautionary savings, investment risk generates rich effects that do not arise in the presence of pure endowment risk. Under a finite-horizon, multiple growth paths and endogenous fluctuations can exist even when agents are very patient. In infinitehorizon economies, multiple steady states may arise from the endogeneity of risk-taking and interest rates instead of the usual wealth effects. Depending on the economy's parameters, the local dynamics around a steady state are locally unique, totally unstable or locally undetermined, and the equilibrium path can be attracted to a limit cycle. The model generates closed-form expressions for the equilibrium dynamics and easily extends to a variety of environments, including heterogeneous capital types and multiple sectors

IPO Pricing in "Hot" Market Conditions: Who Leaves Money on the Table?


The Journal of Finance

février 2005, vol. 60, n°1, pp.487-521

Départements : Finance, GREGHEC (CNRS)

This paper explores the impact of investor sentiment on IPO pricing. Using a model in which the aftermarket price of IPO shares depends on the information about the intrinsic value of the company and investor sentiment, I show that IPOs can be overpriced and still exhibit positive initial return. A sample of recent French offerings with a fraction of the shares reserved for individual investors supports the predictions of the model. Individual investors' demand is positively related to market conditions. Moreover, large individual investors' demand leads to high IPO prices, large initial returns, and poor long-run performance

Judgemental Overconfidence, Self-Monitoring, and Trading Performance in an Experimental Financial Market


Review of Economic Studies

avril 2005, vol. 72, n°2, pp.287-312

Départements : Finance

We measure the degree of overconfidence in judgement (in the form of miscalibration, i.e. the tendency to overestimate the precision of one’s information) and self-monitoring (a form of attentiveness to social cues) of 245 participants and also observe their behaviour in an experimental financial market under asymmetric information. Miscalibrated traders, underestimating the conditional uncertainty about the asset value, are expected to be especially vulnerable to the winner’s curse. High self-monitors are expected to behave strategically and achieve superior results. Our empirical results show that miscalibration reduces and self-monitoring enhances trading performance. The effect of the psychological variables is strong for men but non-existent for women