scholarly journals Private Information, Human Capital, and Optimal 'Home Bias' in Financial Markets

2011 ◽  
Author(s):  
Isaac Ehrlich ◽  
Jong Kook Shin ◽  
Yong Yin
Keyword(s):  
Human Capital ◽  
Financial Markets ◽  
Private Information ◽  
Home Bias

scholarly journals Private Information, Human Capital, and Optimal “Home Bias” in Financial Markets

2011 ◽  
Vol 5 (3) ◽  
pp. 255-301 ◽  
Author(s):  
Isaac Ehrlich ◽  
Jong Kook Shin ◽  
Yong Yin
Keyword(s):  
Human Capital ◽  
Financial Markets ◽  
Private Information ◽  
Home Bias

scholarly journals Welfare Reversals in a Monetary Union

2014 ◽  
Vol 6 (4) ◽  
pp. 246-290 ◽  
Author(s):  
Stéphane Auray ◽  
Aurélien Eyquem
Keyword(s):  
Financial Markets ◽  
Monetary Union ◽  
Risk Sharing ◽  
Home Bias ◽  
Scale Model ◽  
Fiscal Policies ◽  
Medium Scale ◽  
Asymmetric Shocks ◽  
Inflation Rates ◽  
Carry Over

We show that welfare can be lower under complete financial markets than under autarky in a monetary union with home bias, sticky prices, and asymmetric shocks. Such a monetary union is a second-best environment in which the structure of financial markets affects risk-sharing but also shapes the dynamics of inflation rates and the welfare costs from nominal rigidities. Welfare reversals arise for a variety of empirically plausible degrees of price stickiness when the Marshall-Lerner condition is met. These results carry over a model with active fiscal policies, and hold within a medium-scale model, although to a weaker extent. (JEL E31, E52, E62, F33, F41)

scholarly journals Human Capital Accumulation and the Evolution of Overconfidence

Games ◽  
2020 ◽  
Vol 11 (4) ◽  
pp. 46
Author(s):  
Luis Santos-Pinto
Keyword(s):  
Human Capital ◽  
Financial Markets ◽  
Continuous Time ◽  
Capital Accumulation ◽  
Field Data ◽  
Working Life ◽  
Human Capital Accumulation ◽  
Subjective Assessments ◽  
Chess Players ◽  
Distribution Of Income

This paper studies the evolution of overconfidence over a cohort’s working life. To do this, the paper incorporates subjective assessments into a continuous time human capital accumulation model with a finite horizon. The main finding is that the processes of human capital accumulation, skill depreciation, and subjective assessments imply that overconfidence first increases and then decreases over the cohort’s working life. In the absence of skill depreciation, overconfidence monotonically increases over the cohort’s working life. The model generates four additional testable predictions. First, everything else equal, overconfidence peaks earlier in activities where skill depreciation is higher. Second, overconfidence is lower in activities where the distribution of income is more dispersed. Third, for a minority of individuals, overconfidence decreases over their working life. Fourth, overconfidence is lower with a higher market discount rate. The paper provides two applications of the model. It shows the model can help make sense of field data on overconfidence, experience, and trading activity in financial markets. The model can also explain experimental data on the evolution of overconfidence among poker and chess players.

No-Trade in the Laboratory

2011 ◽  
Vol 11 (1) ◽  
Author(s):  
Marco Angrisani ◽  
Antonio Guarino ◽  
Steffen Huck ◽  
Nathan C Larson
Keyword(s):  
Financial Markets ◽  
Private Information ◽  
The Other ◽  
Gains From Trade ◽  
Experimental Markets ◽  
Asset Value ◽  
Market Feedback ◽  
Experimental Treatments ◽  
Zero Sum ◽  
Over Time

We construct laboratory financial markets in which subjects can trade an asset whose value is unknown. Subjects receive private clues about the asset value and then set bid and ask prices at which they are willing to buy or to sell from the other participants. In some of our markets (experimental treatments), there are gains from trade, while in others there are no gains: trade is zero sum. Celebrated no-trade theorems state that differences in private information alone cannot explain trade in the zero sum case. We study whether purely informational trade is eliminated in our experimental markets with no gains. The comparison of our results for gains and no-gains treatments shows that subjects fail to reach the no-trade outcome by pure introspection, but they approach it over time through market feedback and learning. Furthermore, the less noisy the clue-asset relationship is, the closer trade comes to being eliminated entirely.

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