The Wisdom of the Crowd in Dynamic Economies

Pietro Dindo and Filippo Massari

No 2017:17, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

Abstract: The Wisdom of the Crowd applied to financial markets asserts that prices represent a consensus belief that is more accurate than individual beliefs. However, a market selection argument implies that prices eventually reflect only the beliefs of the most accurate agent. In this paper, we show how to reconcile these alternative points of view. In markets in which agents naively learn from equilibrium prices, a dynamic Wisdom of the Crowd holds. Market participation increases agents' accuracy, and equilibrium prices are more accurate than the most accurate agent.

Keywords: Wisdom of the Crowd; Heterogeneous Beliefs; Market Selection Hypothesis; Naive Learning (search for similar items in EconPapers)
JEL-codes: D01 D53 G1 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2017, Revised 2018
New Economics Papers: this item is included in nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: The wisdom of the crowd in dynamic economies (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ven:wpaper:2017:17

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