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Overconfidence and market efficiency with heterogeneous agents

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dc.contributor.author Garcia, Diego
dc.contributor.author Sangiorgi, Francesco
dc.contributor.author Urosevic, Branko
dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
dc.date.accessioned 2017-07-26T10:51:11Z
dc.date.available 2017-07-26T10:51:11Z
dc.date.issued 2004-10-01
dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=786
dc.identifier.citation Economic Theory, Springer, vol. 30(2), pp. 313-336, February, 2007
dc.identifier.uri http://hdl.handle.net/10230/822
dc.description.abstract We study financial markets in which both rational and overconfident agents coexist and make endogenous information acquisition decisions. We demonstrate the following irrelevance result: when a positive fraction of rational agents (endogeneously) decides to become informed in equilibrium, prices are set as if all investors were rational, and as a consequence the overconfidence bias does not aect informational efficiency, price volatility, rational traders expected profits or their welfare. Intuitively, as overconfidence goes up, so does price infornativeness, which makes rational agents cut their information acquisition activities, effectively undoing the standard effect of more aggressive trading by the overconfident.
dc.format.mimetype application/pdf
dc.language.iso eng
dc.relation.ispartofseries Economics and Business Working Papers Series; 786
dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.title Overconfidence and market efficiency with heterogeneous agents
dc.type info:eu-repo/semantics/workingPaper
dc.date.modified 2017-07-23T02:08:49Z
dc.subject.keyword partially revealing equilibria
dc.subject.keyword overconfidence
dc.subject.keyword rational expectations
dc.subject.keyword information
dc.subject.keyword Finance and Accounting
dc.rights.accessRights info:eu-repo/semantics/openAccess

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