Cahiers du CEREMADE

Unité Mixte de Recherche du C.N.R.S. N°7534
Abstract : This paper is a generalization of Calvet et al. (2002) to a dynamic setting. We propose a method to aggregate heterogeneous individual beliefs, in dynamic and complete asset markets, into a single market probability such that it generates, if commonly shared by all investors, the same marginal valuation of assets by the market (the same equilibrium prices) as well as by each individual investor. As a result of the aggregation process, the market portfolio may have to be adjusted (in a predictable way in discrete time and by a finite variation process in continuous time), a reflection of an aggregation bias due to the diversity of beliefs. The construction of a representative agent is shown to be also valid modulo the mentioned adjustment of the market portfolio.
Aggregation of heterogeneous beliefs
JOUINI Elyès, NAPP Clotilde
Université de PARIS - DAUPHINE
Place du Maréchal de Lattre De Tassigny - 75775 PARIS CEDEX 16 - FRANCE
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