Ho-Mou Wu

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We provide sufficient conditions for a dynamic consumption-portfolio problem in continuous time to have a solution for a class of utility functions, when the price system follows a diffusion process and when the space of admissible policies is a linear space. Besides a regularity condition, it suffices to check whether a uniform growth and a local Lipschitz(More)
In this paper we advance the theory that the distribution of beliefs in the market is the most important propagation mechanism of economic volatility. Our model is based on the theory of Rational Beliefs (RB) and Rational Belief Equilibrium (RBE) developed by Kurz [1994], [1997]. The paper argues that most of the observed volatility in financial markets is(More)
This paper examines how, in the presence of individual risk, economic efficiency can be achieved without an unrealistically large number of contingent claims. Market uncertainty is specified in such a way that general types of individual risk and collective risk are properly accounted for and so that, specifically, market clearing is always satisfied ex(More)
This paper studies the effect of correlation in the rational beliefs of agents on the volatility of asset prices. We use the technique of generating variables to study stable and non-stationary processes needed to characterize rational beliefs. We then examine how the stochastic interaction among such variables affect the behavior of a wide class of(More)
This paper views uncertainty and economic fluctuations as being primarily endogenous and internally propagated phenomena. The most important Endogenous Uncertainty examined in this paper is price uncertainty which arises when agents do not have structural knowledge and are compelled to make decisions on the basis of their beliefs. We assume that agents(More)
for many conversations regarding the ideas developed in this paper. He thanks Kenneth Judd for constant advice and guidance regarding the computational techniques to be used and Stanley Black and Maurizio Motolese for providing the dedicated assistance in carrying out the computations. Summary. We study the interrelationship among three observed phenomena:(More)
This paper develops a simple model to analyze the " dual-track " approach to market liberalization as a mechanism for implementing efficient Pareto-improving economic reform, that is, reform achieving efficiency without creating losers. The approach, based on the continued enforcement of the existing plan while simultaneously liberalizing the market, can be(More)