Discussion paper

DP7127 Learning in Financial Markets

We survey the recent literature on learning in financial markets. Our main theme is that many financial market phenomena that appear puzzling at first sight are easier to understand once we recognize that parameters in financial models are uncertain and subject to learning. We discuss phenomena related to the volatility and predictability of asset returns, stock price bubbles, portfolio choice, mutual fund flows, trading volume, and firm profitability, among others.


Veronesi, P and L Pástor (2009), ‘DP7127 Learning in Financial Markets‘, CEPR Discussion Paper No. 7127. CEPR Press, Paris & London. https://cepr.org/publications/dp7127