Cornell Law Library Scholarship@Cornell Law: A Digital Repository Cornell Law Faculty Publications Faculty Scholarship 4-1995 Are Stock Markets Costly Casinos? Disagreement, Market Failure, and Securities Regulation Lynn A. Stout Cornell Law School,
[email protected] Follow this and additional works at: http://scholarship.law.cornell.edu/facpub Part of the Corporation and Enterprise Law Commons, and the Securities Law Commons Recommended Citation Stout, Lynn A., "Are Stock Markets Costly Casinos? Disagreement, Market Failure, and Securities Regulation" (1995). Cornell Law Faculty Publications. Paper 751. http://scholarship.law.cornell.edu/facpub/751 This Article is brought to you for free and open access by the Faculty Scholarship at Scholarship@Cornell Law: A Digital Repository. It has been accepted for inclusion in Cornell Law Faculty Publications by an authorized administrator of Scholarship@Cornell Law: A Digital Repository. For more information, please contact
[email protected]. VIRGINIA LAW REVIEW VOLUME 81 APRIL 1995 NUMBER 3 ARTICLES ARE STOCK MARKETS COSTLY CASINOS? DISAGREEMENT, MARKET FAILURE, AND SECURITIES REGULATION Lynn A. Stout* INTRODUCTION ............................................... 613 I. A HETEROGENEOUS EXPECTATIONS MODEL OF STOCK TRADING ................................................. 620 A. The Puzzle of Speculative Stock Trading ............ 622 B. A Simple Model of Heterogeneous Expectations and HE Trading in a World of Imperfect Information ... 625 C. Potential Deterrents to HE Trading: The Roles of Self-Selection and Successive Generations in Fostering Speculative Markets ........................ 635 1. Optimistic Self-Selection and the Lake Wobegon M arket ........................................... 636 * Professor of Law, Georgetown University Law Center, Guest Scholar, The Brookings Institution. A.B. 1979, M.P.A., 1982, Princeton University; J.D., 1982, Yale University.