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Power Laws in Economics and Finance by Xavier Gabaix is a Economics, Econometrics and Finance article available to read on EtoBox.

What is Power Laws in Economics and Finance about?

A power law (PL) is the form taken by a large number of surprising empirical regularities in economics and finance. This review surveys well-documented empirical PLs regarding income and wealth, the size of cities and firms, stock market returns, trading volume, international trade, and executive pay. It reviews detail-independent theoretical motivations that make sharp predictions concerning the existence and coefficients of PLs, without requiring delicate tuning of model parameters. These theoretical mechanisms include random growth, optimization, and the economics of superstars, coupled with extreme value theory. Some empirical regularities currently lack an appropriate explanation. This article highlights these open areas for future research.

Who reads Power Laws in Economics and Finance?

Author

Xavier Gabaix

Publisher

Annual Reviews

Published

2009

Language

EN

Field

Economics, Econometrics and Finance (Social Sciences)