Market efficiency and learning in an endogenously unstable environment

Goldbaum, D

Market efficiency and learning in an endogenously unstable environment

Goldbaum, D

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Publication Type:: Journal Article
Citation:: Journal of Economic Dynamics and Control, 2005, 29 (5), pp. 953 - 978
Issue Date:: 2005-05-01

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Field	Value	Language
dc.contributor.author	Goldbaum, D https://orcid.org/0000-0002-4228-1408	en_US
dc.date.issued	2005-05-01	en_US
dc.identifier.citation	Journal of Economic Dynamics and Control, 2005, 29 (5), pp. 953 - 978	en_US
dc.identifier.issn	0165-1889	en_US
dc.identifier.uri	http://hdl.handle.net/10453/5143
dc.description.abstract	An informationally inefficiency market is produced without an exogenous source of noise in the price. Fundamental traders acquire private information directly through research. Regression traders employ a learning process to extract the private fundamental information from the public price. The relative popularity between these two strategies evolves based on performance. The model converges towards adoption of regression analysis to the point of creating instability, endogenously producing a noisy price. The lack of a revealing price in the coupled learning and population processes reflects the Grossman and Stiglitz (Amer. Econ. Rev. 70(3)(1980)393) impossibility of informationally efficient markets. © 2004 Elsevier B.V. All rights reserved.	en_US
dc.relation.ispartof	Journal of Economic Dynamics and Control	en_US
dc.relation.isbasedon	10.1016/j.jedc.2004.08.001	en_US
dc.subject.classification	Economics	en_US
dc.title	Market efficiency and learning in an endogenously unstable environment	en_US
dc.type	Journal Article
utslib.citation.volume	5	en_US
utslib.citation.volume	29	en_US
utslib.for	140207 Financial Economics	en_US
utslib.for	1401 Economic Theory	en_US
utslib.for	1402 Applied Economics	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Strength - QFRC - Quantitative Finance Research Centre
utslib.copyright.status	open_access
pubs.issue	5	en_US
pubs.publication-status	Published	en_US
pubs.volume	29	en_US

Abstract:

An informationally inefficiency market is produced without an exogenous source of noise in the price. Fundamental traders acquire private information directly through research. Regression traders employ a learning process to extract the private fundamental information from the public price. The relative popularity between these two strategies evolves based on performance. The model converges towards adoption of regression analysis to the point of creating instability, endogenously producing a noisy price. The lack of a revealing price in the coupled learning and population processes reflects the Grossman and Stiglitz (Amer. Econ. Rev. 70(3)(1980)393) impossibility of informationally efficient markets. © 2004 Elsevier B.V. All rights reserved.

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http://hdl.handle.net/10453/5143