Heterogeneity, Selection, and Wealth Dynamics
AbstractThe market selection hypothesis states that, among expected utility maximizers, competitive markets select for agents with correct beliefs. In some economies this hypothesis holds, whereas in others it fails. It holds in complete-markets economies with a common discount factor and bounded aggregate consumption. It can fail when markets are incomplete, when consumption grows too quickly, or when discount factors and beliefs are correlated. These insights have implications for the general equilibrium modeling of asset prices and macroeconomic phenomena.
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Bibliographic InfoArticle provided by Annual Reviews in its journal Annual Review of Economics.
Volume (Year): 2 (2010)
Issue (Month): 1 (09)
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Find related papers by JEL classification:
- D52 - Microeconomics - - General Equilibrium and Disequilibrium - - - Incomplete Markets
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
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- Giulio Bottazzi & Pietro Dindo, 2011.
"Selection in asset markets: the good, the bad, and the unknown,"
LEM Papers Series
2011/11, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
- Giulio Bottazzi & Pietro Dindo, 2013. "Selection in asset markets: the good, the bad, and the unknown," Journal of Evolutionary Economics, Springer, vol. 23(3), pages 641-661, July.
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