Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/253505 
Year of Publication: 
2020
Citation: 
[Journal:] Theoretical Economics [ISSN:] 1555-7561 [Volume:] 15 [Issue:] 4 [Publisher:] The Econometric Society [Place:] New Haven, CT [Year:] 2020 [Pages:] 1627-1668
Publisher: 
The Econometric Society, New Haven, CT
Abstract: 
The wisdom of the crowd applied to financial markets asserts that prices represent a consensus belief that is more accurate than individual beliefs. However, a market selection argument implies that prices eventually reflect only the beliefs of the most accurate agent. In this paper, we show how to reconcile these alternative points of view. In markets in which agents naively learn from equilibrium prices, a dynamic wisdom of the crowd holds. Market participation increases agents' accuracy, and equilibrium prices are more accurate than the most accurate agent.
Subjects: 
Wisdom of the crowd
heterogeneous beliefs
market selection hypothesis
naive learning
JEL: 
D01
D53
G1
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc Logo
Document Type: 
Article

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