Garcia, DiegoSangiorgi, FrancescoUrosevic, BrankoUniversitat Pompeu Fabra. Departament d'Economia i Empresa2017-07-262017-07-262004-10-01Economic Theory, Springer, vol. 30(2), pp. 313-336, February, 2007http://hdl.handle.net/10230/822We 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.application/pdfengL'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commonsinfo:eu-repo/semantics/workingPaperpartially revealing equilibriaoverconfidencerational expectationsinformationFinance and Accountinginfo:eu-repo/semantics/openAccess