Speculative trade, asset prices and investment levels

Alvaro Sandroni

Economic Theory, 2003, vol. 21, issue 2, 423-433

Abstract: In this paper I consider a dynamically complete market model without intrinsic uncertainty. Agents' beliefs are different, but correct in the limit. Some agents are more patient than others. I show that infinitely often share prices are low and the economy stagnates. Also, infinitely often share prices are high and the economy grows. The changes from growth to stagnation and from stagnation to growth are not caused by exogenous shocks. They are caused by speculative trade among agents with different propensities to save and invest. Copyright Springer-Verlag Berlin Heidelberg 2003

Keywords: Keywords and Phrases: Economic fluctuations; Speculative trade.; JEL Classification Numbers: D83. (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s00199-002-0297-4

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