Common information-processing irrationality as trade creator

Arbeitspapier

We show that a common (identical across investors) irrationality in information processing can be enough to create nontrivial trade, using one of standard partial-equilibrium environments. We can attribute this trade to their common irrationality because we strip the investors and their circumstances of all heterogeneities but purely age (in a sense experience), make investment horizon age-independent, and keep all information complete. The common irrationality in our model takes the form of a somewhat non-Bayesian information processing. The resulting trade between such essentially identical individuals with the very same irrationality in their information processing can also feature different kinds of mispricing.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Paper ; No. 255

Classification and Topics

• Classification: Wirtschaft
• Subject: Aktienmarkt ; Wertpapierhandel ; Anlageverhalten ; Entscheidung unter Unsicherheit ; Information ; Rationalität ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Klishchuk, Bogdan
• Event: Veröffentlichung
• (who): Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition
• (where): München und Berlin
• (when): 2020

Further information

• Handle: http://hdl.handle.net/10419/224071
• Last update: 10.03.2025, 11:45 AM CET