The Louis-André Gérard-Varet prize* for the best paper by a young researcher was awarded today to Daniele D'arienzo, Assistant Professor at Nova School of Business and Economics, at the 2021 ASSET conference in Marseille.
Paper: "Learning, Over-reaction and the Wisdom of the Crowd"
Abstract: How do departures of individual beliefs from Bayesian rationality impact welfare and informational efficiency in financial markets? We allow agents posterior beliefs to depart from the rational expectations hypothesis and to over/under-react to news (i.e. to changes in fundamentals and/or prices). We find that both in a financial market with sequential trading and unit demand and supply, as well as in a financial market with simultaneous trading, with volume and unbounded signals, over-reaction has a positive informational externality, while under-reaction exacerbates any informational friction. Over-reaction mitigates individual losses due non-Bayesian beliefs. Because agents over-react to news, prices aggregate more efficiently private information, relative to the rational case. As a consequence, over-reaction decreases the likelihood of informational cascades, increases the informational content of prices, and it increases welfare.
Daniele has a Ph.D. in Economics and Finance from Bocconi University, 2020; he was represented by his co-author Matteo Bizzarri, Università di Napoli Federico II.
The ASSET board meeting would also wish to extend hearty congratulations to the 4 other nominees for the quality of their paper, listed in alphabetical order:
- Sergio Cappellini, Bocconi University
- Kevin Genna, Católica Lisbon School of Business and Economics
- Melika Liporace, Bocconi University
- Leandro Navarro, Johannes Gutenberg University Mainz
*This prize is in memory of ASSET’s first elected president Louis- André Gerard-Varet, who passed away in January 2001. Louis- André Gérard-Varet was Directeur d'Etudes at EHESS, and Director of GREQAM in Marseille. He was ASSET’s chairman from 1990 to 1997 and its president from 1997 to 1999. ASSET awards the Louis-André Gerard-Varet prize each year to a young author (either a current graduate student or a recent PhD within two years of graduation) of an outstanding paper singled out by the program committee among those submitted to the ASSET annual meeting. The recipient of the prize must be attending the annual meeting, and in the case of co-authored papers, all authors must be individually eligible.
