Date: 2014
Type: Working Paper
Pundits and quacks : financial experts and market feedback
Working Paper, EUI MWP, 2014/22
RUDIGER, Jesper, VIGIER, Adrien, Pundits and quacks : financial experts and market feedback, EUI MWP, 2014/22 - https://hdl.handle.net/1814/32831
Retrieved from Cadmus, EUI Research Repository
By choosing whether or not to follow a financial expert’s advice, a privately informed trader implicitly screens the ability of this expert. We explore the performance of the resulting feedback mechanism. In the medium run, feedback may altogether break down, enabling experts of low ability to maintain a lasting reputation and affect prices durably. Yet in the long run, the market almost always learns experts’ true type. While prices get stuck in the medium run, they thus converge in the long run to the asset’s correct valuation.
Cadmus permanent link: https://hdl.handle.net/1814/32831
ISSN: 1830-7728
Series/Number: EUI MWP; 2014/22
Keyword(s): Informational cascades Experts Reputation Asset price bubbles D82 D83 D84 G14 G20