Market Selection in Large Economies... Its just a matter of Luck!
Event details
| Date | 16.12.2014 |
| Hour | 12:00 › 13:00 |
| Speaker | Filippo MASSARI (UNSW Australia) |
| Location | |
| Category | Conferences - Seminars |
This paper investigates, in a general equilibrium models with a continuum of traders, the hypothesis that markets favor traders with more accurate beliefs. Contrary to the known results for economies populated by finitely many traders, I find that risk attitudes have an effect on survival and that there are cases in which the market selects against traders with correct beliefs. Remarkably, even in these cases, asymptotic equilibrium prices reflect accurate beliefs. Thus, unlike the other known violations of the market selection hypothesis, my result corroborates Freedman's conjecture that the selection forces in the market support the adoption of rational expectation equilibria.
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