Macro‐financial volatility under dispersed information

We provide a production‐based asset pricing model with dispersed information and small deviations from full rational expectations. In the model, aggregate output and equity prices depend on the higher‐order beliefs about aggregate demand and individual stochastic discount factors. We prove that equity price volatility becomes arbitrarily large as the volatility of idiosyncratic shocks diverges to infinity due to the interaction of signal extraction with idiosyncratic trading decisions, while aggregate output volatility falls. We propose a two‐step spectral factorization method that permits closed‐form solutions in the frequency domain applicable to a wide range of models with more hidden states than signals. Our model can quantitatively match output and equity volatilities observed in U.S. data.

Revisiting Prebuilding Dodona

The aim of this paper is to put together the currently dispersed information about the occurrence of architectural remains at the archaeological site of Dodona during the so-called prebuilding phase, mainly at the end of the Late Bronze Age-Beginning of Early Iron Age through the reports and diaries of the site’s excavators. Moreover, the combination of the architectural remains with the portable finds will lead to suggestions about the site’s character during late prehistory. Was it a humble village inhabited by stockbreeders, or a hypaethral sanctuary?

Introduction

If it lacks minimal competence to track the truth, good government is impossible. Even though a lot of dispersed information is available that would help to make competent decisions, governments can fail to collect and aggregate this information. ‘Wisdom of crowds’ arguments appeal to the idea that random noise cancels so that the aggregation of many opinions leads to elimination of errors, which is epistemically valuable. This insight is formalized in Condorcet’s jury theorem. Many objections have been levelled against the theorem or its limited applicability, but we argue that the objections are often exaggerated and the usefulness of the theorem underappreciated.