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2 votes

Budget-feasible set in a portfolio choice problem

The agent owns nothing initially but the endowment. If their endowment would be $0$ in every state, then it should be clear that their initial wealth is zero, and they could only afford a portfolio ...
1 vote

In the context of Blanchard and Watson (1982), what is the difference between the bubble component, bubbles and bubble?

The bubble component refers to the deviation of the price of an asset from its fundamental value, that is, the value that would be expected based on economic fundamentals such as earnings or dividends....
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