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Normative inference in efficient markets

  • Marek WeretkaEmail author
Research Article
  • 52 Downloads

Abstract

This paper develops a nonparametric method to infer social preferences over policies from prices of securities when agents have non-stationary heterogeneous preferences. We allow for arbitrary efficient risk-sharing mechanisms, formal and informal, and consider a large class of policies. We present a condition on the distribution of aggregate wealth that is necessary and sufficient for the revelation of social preferences over a universal set of policies. We also provide a weaker condition that is sufficient for revelation of social preferences for an arbitrary finite collection of policies.

Keywords

Social preferences Normative predictions Asset prices 

JEL Classification

D43 D53 G11 G12 L13 

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of Wisconsin-MadisonMadisonUSA
  2. 2.FAME|GRAPEWarsawPoland

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