Market selection
Name
Kogan_Market selection.pdf
Description
Accepted version
Size
654.68 KB
Format
Adobe PDF
Checksum (MD5)
f324f76f427f8ccbc528468cfac57528
Author(s)
Kogan, Leonid
Ross, Stephen A.
Wang, Jiang
Westerfield, Mark M.
Date Issued
December 2016
Journal
Journal of Economic Theory
Publisher
Elsevier BV
Citation
Kogan, Leonid et al. "Market selection." Journal of Economic Theory 168 (March 2017): 209-236 © 2016 Elsevier Inc
Version
Author's final manuscript
Abstract
The hypothesis that financial markets punish traders who make relatively inaccurate forecasts and eventually eliminate the effect of their beliefs on prices is of fundamental importance to the standard modeling paradigm in asset pricing. We establish straightforward necessary and sufficient conditions for agents to survive and to affect prices in the long run in a general setting with minimal restrictions on endowments, beliefs, or utility functions. We describe a new mechanism for the distinction between survival and price impact in a broad class of economies. Our results cover economies with time-separable utility functions, including possibly state-dependent preferences.
MIT Department
Sloan School of Management
Terms of Use
Creative Commons Attribution-NonCommercial-NoDerivs License
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1016/j.jet.2016.12.002
