Market Selection in Large Economies: A Matter of Luck

43 Pages Posted: 4 Feb 2015 Last revised: 4 Oct 2018

See all articles by Filippo Massari

Filippo Massari

Bocconi University - Department of Decision Sciences; University of East Anglia

Date Written: April 23, 2018


In a general equilibrium model with a continuum of traders and bounded aggregate endowment, I investigate the Market Selection Hypothesis that markets favor traders with accurate beliefs. Contrary to known results for economies with (only) finitely many traders, I find that risk attitudes affect traders' survival and that markets can favor ``lucky'' traders with incorrect beliefs over ''skilled'' traders with accurate beliefs. My model allows for a clear distinction between luck and skills and it shows that market selection forces induce efficient prices even when accurate traders do not survive in the long run.

Keywords: market selection hypothesis, asset pricing, De-Finetti's theorem

JEL Classification: D50, D90, G12

Suggested Citation

Massari, Filippo, Market Selection in Large Economies: A Matter of Luck (April 23, 2018). Available at SSRN: or

Filippo Massari (Contact Author)

Bocconi University - Department of Decision Sciences ( email )

Via Roentgen 1
Milan, 20136

University of East Anglia ( email )

Norwich Research Park
Norwich, Norfolk NR4 7TJ
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics