Economic Theory

, Volume 66, Issue 2, pp 407–447 | Cite as

Long-run heterogeneity in an exchange economy with fixed-mix traders

  • Giulio Bottazzi
  • Pietro Dindo
  • Daniele Giachini
Research Article


We consider an exchange economy where agents have heterogeneous beliefs and assets are long-lived, and investigate the coupled dynamics of asset prices and agents’ wealth. We assume that agents hold fixed-mix portfolios and invest on each asset proportionally to its expected dividends. We prove the existence and uniqueness of a sequence of arbitrage-free market equilibrium prices and provide sufficient conditions for an agent, or a group of agents, to survive or dominate. Our main finding is that long-run coexistence of agents with heterogeneous beliefs, leading to asset prices endogenous fluctuations, is a generic outcome of the market selection process.


Market selection hypothesis Heterogeneous beliefs Asset pricing Evolutionary finance Incomplete markets 

JEL Classification

C60 D52 D53 G11 G12 


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Copyright information

© Springer-Verlag GmbH Germany 2017

Authors and Affiliations

  1. 1.Dipartimento di EconomiaUniversità Ca’ Foscari VeneziaVeneziaItaly
  2. 2.Istituto di EconomiaScuola Superiore Sant’AnnaPisaItaly

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