SFB 303 Discussion Paper No. A - 316

Author: Rothschild, Michael
Title: Economic Theory Teaches Us that Economic Theory Teaches Us Nothing: The Case of Asset Prices
Abstract: The purpose of this note is to put in the public domain, a result which is so simple and obvious that "everyone knows it," but which some find surprising and interesting when it is presented to them. The question we address is the following: "What restrictions does economic theory (the assumption that rational agents maximize) place on asset prices?" The answer we give: "almost none," is similar to the one which Sonnenschein (1973) gave when he asked the same question about (excess) demand functions.
Creation-Date: August 1990
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