The Social Value of Financial Expertise

Pablo Kurlat ()

American Economic Review, 2019, vol. 109, issue 2, 556-90

Abstract: I study expertise acquisition in a model of trading under asymmetric information. I propose and implement a method to measure r, the ratio of the marginal social value to the marginal private value of expertise. This can be decomposed into three sufficient statistics: traders' average profits, the fraction of bad assets among traded assets, and the elasticity of good assets traded with respect to capital inflows. I measure r = 0.16 for the junk bond underwriting market. Since this is less than 1, it implies that marginal investments in expertise destroy surplus.

JEL-codes: D82 G11 G14 G21 L84 (search for similar items in EconPapers)
Date: 2019
Note: DOI: 10.1257/aer.20171735
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Citations: View citations in EconPapers (8)

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Related works:
Working Paper: The Social Value of Financial Expertise (2017)
Working Paper: The Social Value of Financial Expertise (2016)
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