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On the Market Selection Hypothesis in a Mean Reverting Environment

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  • Emilio Barucci

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  • Marco Casna

Abstract

We investigate the market selection hypothesis in a mean reverting environment. We consider three models varying the endowment process and agents’ beliefs and we show that with a constant relative risk aversion utility, controlling for the discount factor, agents with incorrect beliefs about the level of the endowment process cannot survive. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Emilio Barucci & Marco Casna, 2014. "On the Market Selection Hypothesis in a Mean Reverting Environment," Computational Economics, Springer;Society for Computational Economics, vol. 44(1), pages 101-126, June.
  • Handle: RePEc:kap:compec:v:44:y:2014:i:1:p:101-126
    DOI: 10.1007/s10614-013-9400-0
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    References listed on IDEAS

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    More about this item

    Keywords

    Market selection; Heterogeneous opinions; Mean reversion; Growth; D53; D84; G11; G14;

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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