What Can Capital Markets Teach Us About Learning?

27 Pages Posted: 11 Jun 2021 Last revised: 18 Jun 2021

Date Written: June 17, 2021


These are Powerpoint slides prepared for a seminar at ISMed, the Institute for Studies on the Mediterranean, under the aegis the National Research of Italy (CNR). Standard models of finance assume risks are stable, in which case beliefs normally converge smoothly toward the actual risks. In fact, most macro financial risks are chronically unstable, in which case rational learning often looks turbulently irrational. These findings sketch the main findings and implications. For more elaboration, see the companion paper Enigmatic Forecasts of Enigmatic Risks, SSRN 3863662, or other sources listed on the last slide.

Keywords: financial markets, financial forecast, asset pricing, rational expectation, anticipation, uncertainty, probabilities, surprise, information acquisition, behavioral finance, risk premium, sovereign debt

JEL Classification: D84, G12, G17

Suggested Citation

Osband, Kent, What Can Capital Markets Teach Us About Learning? (June 17, 2021). Available at SSRN: https://ssrn.com/abstract=3864592 or http://dx.doi.org/10.2139/ssrn.3864592

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