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Learning in Financial Markets

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  • Lubos Pastor
  • Pietro Veronesi

Abstract

We survey the recent literature on learning in financial markets. Our main theme is that many financial market phenomena that appear puzzling at first sight are easier to understand once we recognize that parameters in financial models are uncertain and subject to learning. We discuss phenomena related to the volatility and predictability of asset returns, stock price bubbles, portfolio choice, mutual fund flows, trading volume, and firm profitability, among others.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14646.

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Date of creation: Jan 2009
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Publication status: published as Lubos Pastor & Pietro Veronesi, 2009. "Learning in Financial Markets," Annual Review of Financial Economics, Annual Reviews, vol. 1(1), pages 361-381, November.
Handle: RePEc:nbr:nberwo:14646

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