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Financial Expertise and Asset Prices

Author

Listed:
  • Lei Zhang

    (UCLA)

  • Hanno Lustig

    (Anderson School of Business)

  • Andrea Eisfeldt

    (UCLA Anderson School of Management)

Abstract

This paper studies the effects of the joint distribution of the stock financial expertise and financial wealth on asset prices. By modeling financial expertise as a stock, we are able to incorporate economic ideas from capital theory as well as industrial organization into a model with slow moving capital. We aim to explain the persistence of risky arbitrage opportunities by modeling the entry and investment decisions of ``financial experts''. Our theory also naturally yields size and performance distributions for experts, and we will use empirical distributions from the hedge fund industry to help to calibrate our model.

Suggested Citation

  • Lei Zhang & Hanno Lustig & Andrea Eisfeldt, 2013. "Financial Expertise and Asset Prices," 2013 Meeting Papers 1347, Society for Economic Dynamics.
    • Handle: RePEc:red:sed013:1347
    as

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    References listed on IDEAS

    as
    1. Vincent Glode & Richard C. Green & Richard Lowery, 2012. "Financial Expertise as an Arms Race," Journal of Finance, American Finance Association, vol. 67(5), pages 1723-1759, October.
    2. Vincent Glode & Richard C. Green & Richard Lowery, 2012. "Financial Expertise as an Arms Race," Journal of Finance, American Finance Association, vol. 67(5), pages 1723-1759, October.
    3. Dimitri Vayanos & Denis Gromb, 2012. "Financially constrained arbitrage and cross-market contagion," 2012 Meeting Papers 112, Society for Economic Dynamics.
    Full references (including those not matched with items on IDEAS)

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