Can representativeness heuristic traders survive in a competitive securities market?

Guo Ying Luo

Journal of Financial Markets, 2013, vol. 16, issue 1, 152-164

Abstract: The literature views aggressive trading behavior as the key for representativeness heuristic traders to survive in competition with rational traders. This paper provides another reason. That is, in this dynamic model of a competitive securities market, representativeness heuristic traders can derive more expected profit from the misvaluations (created by noise traders) than can rational traders. Consequently, the expected profit for heuristic traders can be bigger than that for rational traders. If traders' types replicate according to the profitability of the strategies, heuristic traders can survive or even drive out rational traders.

Keywords: Representativeness heuristic traders; Survivorship; Natural selection (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:16:y:2013:i:1:p:152-164

DOI: 10.1016/j.finmar.2012.05.001

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