The Investor Recognition Hypothesis in a Dynamic General Equilibrium: Theory and

@inproceedings{Shapiro1999TheIR,
  title={The Investor Recognition Hypothesis in a Dynamic General Equilibrium: Theory and},
  author={Alexander Shapiro},
  year={1999}
}
This paper analyzes equilibrium in a dynamic pure-exchange economy under a generalization of Merton's (1987) investor recognition hypothesis (IRH). Because of information costs, a class of investors is assumed to possess incomplete information, which suffices to implement only a particular trading strategy. The IRH is mapped into corresponding portfolio restrictions that bind a subset of agents. The model is formulated in continuous time, and detailed characterization of equilibrium quantities… CONTINUE READING

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