The article ” Financial markets and Keynes’s long-term expectations” is published in the Special Issue: F. H. Knight’s Risk, Uncertainty, and Profit and J. M. Keynes’ Treatise on Probability after 100 years, Cambridge Journal of Economics Cambridge Journal of Economics, Volume 45, Issue 5, September 2021, Pages 1047–1067, https://academic.oup.com/cje/article-abstract/45/5/1047/6309331?redirectedFrom=fulltext
The paper considers recent development of the theory and puts in evidence a different approach to the beauty contest and the notion of convention in the General Theory. Of course we give an interpretation of non-numerical probabilities in the TP following the seminal papers on MPs approach.
Abstract, This paper presents an intuitive way to represent Keynes’s theory of expectations and its implications for financial markets. Further to a suggestion by Ellsberg, a coherent expectational function for the valuation of assets under Keynesian uncertainty is derived. By following the thread that goes from the non-numerical probabilities of the Treatise on Probability to the expectations of the General Theory, this paper suggests that a function accounting for Keynesian expectations can be modelled by using a class of the so-called ε-contaminated probability priors, where the parameter ε is suggestive of the quality of information about the relevant odds.