The Social Value of Financial Expertise

Pablo Kurlat ()

No 22047, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: I study expertise acquisition in a model of trading under asymmetric information. I propose and implement a method to estimate the ratio of social to private marginal 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. For venture capital, the ratio is between 0.64 and 0.83 and for junk bond underwriting, it is between 0.09 and 0.26. In both cases this is less than one so at the margin financial expertise destroys surplus.

JEL-codes: D53 D82 G14 (search for similar items in EconPapers)
Date: 2016-02
New Economics Papers: this item is included in nep-mst
Note: EFG PE
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Published as Pablo Kurlat, 2019. "The Social Value of Financial Expertise," American Economic Review, vol 109(2), pages 556-590.

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Related works:
Journal Article: The Social Value of Financial Expertise (2019)
Working Paper: The Social Value of Financial Expertise (2017)
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