Speculative Dynamics and the Role of Feedback Traders

David M. Cutler (), James Poterba () and Lawrence H. Summers

No 3243, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper summarizes our earlier research documenting the characteristic speculative dynamics of many asset markets and suggests a framework for understanding them. Our model incorporates "feedback traders," traders whose demand is based on the history of past returns rather than the expectation of future fundamentals. We use this framework to describe ways in which the characteristic return patterns might be generated, and also to address the long-standing question of whether profitable speculation stabilizes asset markets.

Date: 1991-01
Note: EFG ME
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Related works:
Working Paper: SPECULATIVE DYNAMICS AND THE ROLE OF FEEDBACK TRADERS (1990)
Journal Article: Speculative Dynamics and the Role of Feedback Traders (1990)
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