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- Title
Market selection in large economies: A matter of luck.
- Authors
Massari, Filippo
- Abstract
In a general equilibrium model with a continuum of traders and bounded aggregate endowment, I investigate the market selection hypothesis that markets favor traders with accurate beliefs. Contrary to known results for economies with (only) finitely many traders, I find that risk attitudes affect traders' survival and that markets can favor "lucky" traders with incorrect beliefs over "skilled" traders with accurate beliefs. My model allows for a clear distinction between luck and skills, and it shows that market selection forces induce efficient prices even when accurate traders do not survive in the long run.
- Subjects
ASSET management; BOND market; ENDOWMENT effect (Economics); ECONOMIC development; BELIEF &; doubt
- Publication
Theoretical Economics, 2019, Vol 14, Issue 2, p437
- ISSN
1555-7561
- Publication type
Article
- DOI
10.3982/TE2456