We create a simulated financial market and examine the effect of different levels of active and passive investment on fundamental market efficiency. In our simulated market, active, passive, and random investors interact with each other through issuing orders. Active and passive investors select...

We build a model of the law of small numbers (LSN)--the incorrect belief that even small samples represent the properties of the underlying population--to study its implications for trading behavior and asset prices. In our model, a belief in the LSN induces investors to expect short-term price...

This paper investigates the presence of financial bubbles in the environmentally friendly investments captured by the ESG markets. By using the log-periodic power law singularity framework, we identified several periods of positive and negative bubbles in the short, medium, and long term....