Open Access Journal Article

It is All About Information: Six Common Fallacies in Financial Economics

by Klaus Schredelseker a, b,*
a
Department of Banking and Finance, Universität Innsbruck, Innsbruck, Austria
b
Dipartimento di Scienze per l'Economia e l'Impresa, Università degli Studi di Firenze, Firenze, Italy
*
Author to whom correspondence should be addressed.
JIE  2024 2(4):38; https://doi.org/10.58567/jie02040002
Received: 28 July 2024 / Accepted: 11 November 2024 / Published Online: 10 January 2025
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Abstract

Based on the results of a simple Agent Based Model (ABM) six common and widely affirmed statements in financial economics are discussed: (1) The better an investor is informed, the higher his performance is expected to be, (2) There is a well-defined state of art how to make sound financial decisions, (3) High standards of public information create private as well as public value, (4) Highly skilled financial analysts usually decide better than their lousy colleagues, (5) The market loses informational efficiency if traders abstain from information, (6) To use Bayes’ updating rule means to make rational financial decisions. Financial markets are complex adaptive systems, in order to understand them, the interaction of autonomous agents has to be brought into the focus. As the ABM methodology allows to do this better than neoclassical methods, this simple technique is adopted and allows to evidence that all these beliefs, even if they may be deeply rooted in the profession, are probably false.

Keywords: Financial Analysis; Information in Financial Markets; Information-Based Investment Strategy; Market Efficiency; Public Information in Investment Decisions;
Copyright: © 2025 by Schredelseker. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.

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ACS Style
Schredelseker, K. It is All About Information: Six Common Fallacies in Financial Economics. Journal of Information Economics, 2024, 2, 38. https://doi.org/10.58567/jie02040002
AMA Style
Schredelseker K. It is All About Information: Six Common Fallacies in Financial Economics. Journal of Information Economics; 2024, 2(4):38. https://doi.org/10.58567/jie02040002
Chicago/Turabian Style
Schredelseker, Klaus 2024. "It is All About Information: Six Common Fallacies in Financial Economics" Journal of Information Economics 2, no.4:38. https://doi.org/10.58567/jie02040002
APA style
Schredelseker, K. (2024). It is All About Information: Six Common Fallacies in Financial Economics. Journal of Information Economics, 2(4), 38. https://doi.org/10.58567/jie02040002

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