Wisdom of the institutional crowd

Kevin Primicerio, Damien Challet and Stanislao Gualdi

Papers from arXiv.org

Abstract: The average portfolio structure of institutional investors is shown to have properties which account for transaction costs in an optimal way. This implies that financial institutions unknowingly display collective rationality, or Wisdom of the Crowd. Individual deviations from the rational benchmark are ample, which illustrates that system-wide rationality does not need nearly rational individuals. Finally we discuss the importance of accounting for constraints when assessing the presence of Wisdom of the Crowd.

Date: 2017-03, Revised 2017-09
New Economics Papers: this item is included in nep-hpe
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http://arxiv.org/pdf/1703.01989 Latest version (application/pdf)

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Working Paper: Wisdom of the institutional crowd (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:1703.01989

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