Even when participants know very little about their environment, the market itself, by serving as a selection process of information, promotes an efficient aggregate outcome. To emphasize the role of the market and the importance of natural selection rather than the strategic actions of...

This paper develops a simple signaling model whereby high valuation firm uses levels of investment, debt and dividends to convey information to the market regarding its valuation. Conditions are determined under which investment, debt and dividends are employed in a separating Nash equilibrium....

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...