In a financial market where all agents are rational, no trading would ever happen because either you don't know something that seller knows while buying or buyer doesn't know what you know So the fact that trading happens is a proof of irrationality in financial markets.
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Similarly, w/r/t financial instruments, we might have different: * risk tolerances * other positions / circumstances dictating the trade (buyers/sellers of e.g. options are not necessarily symmetric; hedgers and speculators can make great counterparties) * time horizons * etc
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I'm with you on that when it comes to practice. I'm talking about perfectly rational agents. You may find this fascinating: Aumann's agreement theorem. This writeup by
@robinhanson is great: http://www.overcomingbias.com/2006/12/agreeing_to_agr.html … - 2 more replies
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