This paper examines the impact of earnings fixated traders on the asset price in a competitive securities market. In the market, there is a risky asset whose payoff is normally distributed. Earnings fixated traders underestimate the mean and variance of the asset payoff due to the fact that...

Recent research has proposed several ways in which overconfident traders can persist in competition with rational traders. This paper offers an additional reason: overconfident traders do better than purely rational traders at exploiting mispricing caused by liquidity or noise traders. We...

Recent research has proposed several ways in which overconfident traders can persist in competition with rational traders. This paper offers an additional reason: overconfident traders do better than purely rational traders at exploiting mispricing caused by liquidity or noise traders. We...

This paper builds an evolutionary model of an industry where firms produce differentiated products. Firms have different average cost functions and different demand functions. Firms are assumed to be totally irrational in the sense that firms enter the industry regardless of the existence of...

The literature views aggressive trading behavior as the key for representativeness heuristic traders to survive in competition with rational traders. This paper provides another reason. That is, in this dynamic model of a competitive securities market, representativeness heuristic traders can...