Beauty Contest and Social Value of Fintech: An Economic Analysis

摘要

With the advance of financial technology (Fintech), traders in financial markets are using the information available on social media to gauge investor sentiment and form higher-order beliefs. Following the insight of Keynes (1936) on financial markets being akin to a beauty contest, we develop an analytical model to analyze how higher-order beliefs, driven by the Fintech revolution, affect market efficiency and social welfare of investors. Since accounting disclosure is the main source of public information, our results highlight that the use of Fintech in financial trading can dramatically affect the optimal level of accounting disclosure (i.e., transparency) in the market.