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    Market Power, Survival and Accuracy of Predictions in Financial Markets*

    Leoni, Dr. Patrick (2006) Market Power, Survival and Accuracy of Predictions in Financial Markets*. UNSPECIFIED. (Unpublished)

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    In a standard General Equilibrium framework, we consider an agent strategically using her large volum of trade to influence asset prices to increase her consumption. We show that , as in Sandroni (2000) for the competitive case, if markets are dynamically complete and some general conditions on market preferences are met then this agent' long-run consumption will vanish if she makes less accurate predictions than the market, and will maintain her market power otherwise. We thus agrue that the Market Selection Hypothesis extends to this situation of market power, in contract to Alchain (1950) and Friedman (1953) who claimed that this selection was solely driven by the competitivness of markets.

    Item Type: Other
    Keywords: Market Selection hypothesis, Market power, Servival, Asset pricing.
    Academic Unit: Faculty of Social Sciences > Economics, Finance and Accounting
    Item ID: 449
    Depositing User: Ms Sandra Doherty
    Date Deposited: 21 Nov 2006
    Refereed: No
    Use Licence: This item is available under a Creative Commons Attribution Non Commercial Share Alike Licence (CC BY-NC-SA). Details of this licence are available here

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