Market selection in large economies: a matter of luck

Filippo Massari

Theoretical Economics, 2019, vol. 14, issue 2

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.

Keywords: Market selection hypothesis; asset pricing; general equilibrium (search for similar items in EconPapers)
JEL-codes: D50 D90 G12 (search for similar items in EconPapers)
Date: 2019-05-28
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://econtheory.org/ojs/index.php/te/article/viewFile/20190437/23814/690 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:the:publsh:2456

Access Statistics for this article

Theoretical Economics is currently edited by Federico Echenique, Mira Frick, Pablo Kurlat, Juuso Toikka, Rakesh Vohra

More articles in Theoretical Economics from Econometric Society
Bibliographic data for series maintained by Martin J. Osborne ().