Title

Generic Inefficiency of Stock Market Equilibrium When Markets Are Incomplete

Document Type

Discussion Paper

Publication Date

2-1-1988

CFDP Number

863

CFDP Pages

53

Abstract

A stock market is a mechanism by which the ownership and control of firms is determined through the trading of securities. It is on this market that many of the major risks faced by society are shared through the exchange of securities and the production decisions that influence the present and future supply of resources are determined. If the overall structure of markets is incomplete can the stock market be expected to perform its role of exchanging risks and allocating investment efficiently? It is this question that we seek to answer.

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