On non-ergodic asset prices |
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Authors: | Ulrich Horst Jan Wenzelburger |
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Institution: | 1.Department of Mathematics,University of British Columbia,Vancouver,Canada;2.Fakult?t für Wirtschaftswissenschaften,Universit?t Bielefeld,Bielefeld,Germany |
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Abstract: | We investigate the asset prices dynamics and the long-run market shares of two competing financial mediators who are selected by consumers. We demonstrate that the social interaction among consumers constitutes an endogenous path-depending source of risk in a financial market. Depending on consumers’ evaluation of the mediator’s investment, asset prices may behave in a non-ergodic manner: the price process converges in distribution but the limiting distribution is not necessarily uniquely determined, its multiplicity being characterized by the multiplicity of possible long-run market shares. The convergence of the process is sensitive to initial conditions and depends on the history of noise-trader transactions. Long-run portfolio holdings may be in-efficient since investors holding mean-variance efficient portfolios may not be identified. |
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Keywords: | CAPM Financial markets Social interaction Random difference equations |
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