Econometrica: Jul 2017, Volume 85, Issue 4
The Identification of Beliefs from Asset Demand
Felix Kübler, Herakles PolemarchakisThe demand for assets as prices and initial wealth vary identifies beliefs and attitudes towards risk. We derive conditions that guarantee identification with no knowledge either of the cardinal utility index (attitudes towards risk) or of the distribution of future endowments or payoffs of assets; the argument applies even if the asset market is incomplete and demand is observed only locally.
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Supplement to "The Identification of Beliefs from Asset Demand"
This supplement contains Appendices A and B for the manuscript.