Can future systemic financial risks be quantified?: ergodic vs nonergodic stochastic processes

Detalhes bibliográficos
Autor(a) principal: Davidson,Paul
Data de Publicação: 2009
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Revista de Economia Política
Texto Completo: http://old.scielo.br/scielo.php?script=sci_arttext&pid=S0101-31572009000400001
Resumo: Different axioms underlie efficient market theory and Keynes's liquidity preference theory. Efficient market theory assumes the ergodic axiom. Consequently, today's decision makers can calculate with actuarial precision the future value of all possible outcomes resulting from today's decisions. Since in an efficient market world decision makers "know" their intertemporal budget constraints, decision makers never default on a loan, i.e., systemic defaults, insolvencies, and bankruptcies are impossible. Keynes liquidity preference theory rejects the ergodic axiom. The future is ontologically uncertain. Accordingly systemic defaults and insolvencies can occur but can never be predicted in advance.
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spelling Can future systemic financial risks be quantified?: ergodic vs nonergodic stochastic processesergodic axiomefficient market theoryliquidity preference theoryprobabilistic riskuncertaintyDifferent axioms underlie efficient market theory and Keynes's liquidity preference theory. Efficient market theory assumes the ergodic axiom. Consequently, today's decision makers can calculate with actuarial precision the future value of all possible outcomes resulting from today's decisions. Since in an efficient market world decision makers "know" their intertemporal budget constraints, decision makers never default on a loan, i.e., systemic defaults, insolvencies, and bankruptcies are impossible. Keynes liquidity preference theory rejects the ergodic axiom. The future is ontologically uncertain. Accordingly systemic defaults and insolvencies can occur but can never be predicted in advance.Centro de Economia Política2009-12-01info:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersiontext/htmlhttp://old.scielo.br/scielo.php?script=sci_arttext&pid=S0101-31572009000400001Brazilian Journal of Political Economy v.29 n.4 2009reponame:Revista de Economia Políticainstname:EDITORA 34instacron:EDITORA_3410.1590/S0101-31572009000400001info:eu-repo/semantics/openAccessDavidson,Pauleng2010-05-13T00:00:00Zoai:scielo:S0101-31572009000400001Revistahttps://centrodeeconomiapolitica.org.br/repojs/index.php/journalONGhttps://centrodeeconomiapolitica.org.br/repojs/index.php/journal/oai||cecilia.heise@bjpe.org.br1809-45380101-3157opendoar:2010-05-13T00:00Revista de Economia Política - EDITORA 34false
dc.title.none.fl_str_mv Can future systemic financial risks be quantified?: ergodic vs nonergodic stochastic processes
title Can future systemic financial risks be quantified?: ergodic vs nonergodic stochastic processes
spellingShingle Can future systemic financial risks be quantified?: ergodic vs nonergodic stochastic processes
Davidson,Paul
ergodic axiom
efficient market theory
liquidity preference theory
probabilistic risk
uncertainty
title_short Can future systemic financial risks be quantified?: ergodic vs nonergodic stochastic processes
title_full Can future systemic financial risks be quantified?: ergodic vs nonergodic stochastic processes
title_fullStr Can future systemic financial risks be quantified?: ergodic vs nonergodic stochastic processes
title_full_unstemmed Can future systemic financial risks be quantified?: ergodic vs nonergodic stochastic processes
title_sort Can future systemic financial risks be quantified?: ergodic vs nonergodic stochastic processes
author Davidson,Paul
author_facet Davidson,Paul
author_role author
dc.contributor.author.fl_str_mv Davidson,Paul
dc.subject.por.fl_str_mv ergodic axiom
efficient market theory
liquidity preference theory
probabilistic risk
uncertainty
topic ergodic axiom
efficient market theory
liquidity preference theory
probabilistic risk
uncertainty
description Different axioms underlie efficient market theory and Keynes's liquidity preference theory. Efficient market theory assumes the ergodic axiom. Consequently, today's decision makers can calculate with actuarial precision the future value of all possible outcomes resulting from today's decisions. Since in an efficient market world decision makers "know" their intertemporal budget constraints, decision makers never default on a loan, i.e., systemic defaults, insolvencies, and bankruptcies are impossible. Keynes liquidity preference theory rejects the ergodic axiom. The future is ontologically uncertain. Accordingly systemic defaults and insolvencies can occur but can never be predicted in advance.
publishDate 2009
dc.date.none.fl_str_mv 2009-12-01
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
dc.type.status.fl_str_mv info:eu-repo/semantics/publishedVersion
format article
status_str publishedVersion
dc.identifier.uri.fl_str_mv http://old.scielo.br/scielo.php?script=sci_arttext&pid=S0101-31572009000400001
url http://old.scielo.br/scielo.php?script=sci_arttext&pid=S0101-31572009000400001
dc.language.iso.fl_str_mv eng
language eng
dc.relation.none.fl_str_mv 10.1590/S0101-31572009000400001
dc.rights.driver.fl_str_mv info:eu-repo/semantics/openAccess
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv text/html
dc.publisher.none.fl_str_mv Centro de Economia Política
publisher.none.fl_str_mv Centro de Economia Política
dc.source.none.fl_str_mv Brazilian Journal of Political Economy v.29 n.4 2009
reponame:Revista de Economia Política
instname:EDITORA 34
instacron:EDITORA_34
instname_str EDITORA 34
instacron_str EDITORA_34
institution EDITORA_34
reponame_str Revista de Economia Política
collection Revista de Economia Política
repository.name.fl_str_mv Revista de Economia Política - EDITORA 34
repository.mail.fl_str_mv ||cecilia.heise@bjpe.org.br
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