Big Market Delusion: Electric Vehicles

10 Pages Posted: 22 Mar 2021

See all articles by Robert D. Arnott

Robert D. Arnott

Research Affiliates, LLC

Bradford Cornell

Anderson Graduate School of Management, UCLA

Lillian J. Wu

Research Affiliates, LLC

Date Written: March 9, 2021

Abstract

This paper applies the “big market delusion” concept developed by Cornell and Damodaran to the electric vehicles market. The hallmark of a big market delusion is when all the firms in the evolving industry rise together even though they are often direct competitors. Investors become so enthusiastic that each firm is priced as if it will be a major winner in the evolving big market despite the fact that this is a fallacy of composition. The sum of the parts cannot be greater than the whole. We present evidence that the electric vehicles market can be characterized as a prime example of a big market delusion. When then draw out the implications of that finding for investors.

Keywords: Market Efficiency, Big Market Delusion, Asset Pricing

JEL Classification: G0, G1, G14

Suggested Citation

Arnott, Robert D. and Cornell, Bradford and Wu, Lillian J., Big Market Delusion: Electric Vehicles (March 9, 2021). Available at SSRN: https://ssrn.com/abstract=3801052 or http://dx.doi.org/10.2139/ssrn.3801052

Robert D. Arnott

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Bradford Cornell (Contact Author)

Anderson Graduate School of Management, UCLA ( email )

Pasadena, CA 91125
United States
626 833-9978 (Phone)

Lillian J. Wu

Research Affiliates, LLC ( email )

620 Newport Center Dr
Suite 900
Newport Beach, CA 92660
United States

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