How Financial Markets Create Superstars

77 Pages Posted: 19 Jan 2021 Last revised: 13 May 2024

See all articles by Spyros Terovitis

Spyros Terovitis

University of Amsterdam, Finance Group

Vladimir Vladimirov

University of Amsterdam Business School; Centre for Economic Policy Research (CEPR); Finance Theory Group (FTG)

Multiple version iconThere are 2 versions of this paper

Date Written: May 12, 2024


By aggregating information into prices, financial markets help guide the efficient allocation of resources. We show, however, that speculators without information about firms' fundamentals can exploit this relationship and profit from inflating firm valuations. Such speculation is profitable because high valuations attract employees, business partners, and investors, creating value at targeted firms at the cost of diverting resources away from better firms. Uninformed speculation is most profitable in "normal" (neither hot nor cold) markets and when targeted firms use performance pay or equity to compensate stakeholders. Investors, such as VCs, can profit from inflating firm valuations also in private markets.

Keywords: Speculation, manipulation, superstar firms, unicorns, market efficiency, stakeholders, high-skilled employees, misallocation of resources

JEL Classification: D62, D82, D84, G30

Suggested Citation

Terovitis, Spyros and Vladimirov, Vladimir, How Financial Markets Create Superstars (May 12, 2024). Available at SSRN: or

Spyros Terovitis

University of Amsterdam, Finance Group ( email )

M3.04, Amsterdam Business School
Plantage Muidergracht 12
Amsterdam, 1018TV

Vladimir Vladimirov (Contact Author)

University of Amsterdam Business School ( email )

Roetersstraat 18
Amsterdam, 1018WB

Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

Finance Theory Group (FTG) ( email )

United States

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