The economics of rational speculation in the presence of positive feedback trading
Lutz Arnold () and
Stephan Brunner
The Quarterly Review of Economics and Finance, 2015, vol. 57, issue C, 161-174
Abstract:
This paper generalizes De Long et al.'s (1990a) seminal model of destabilizing rational speculation in the presence of positive feedback trading by incorporating additional trading dates and an additional informative signal. Rational speculation can be stabilizing in the generalized model. The model is compatible with observed patterns of asset prices, such as short-term momentum and mean reversion. There is little scope for interpreting the equilibrium asset price as deviating from fundamental value.
Keywords: G12; G14; Market efficiency; Positive feedback trading; Bubbles (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (4)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:57:y:2015:i:c:p:161-174
DOI: 10.1016/j.qref.2014.11.005
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