Informational Overshooting, Booms and Crashes
Joseph Zeira
No 823, CEPR Discussion Papers from C.E.P.R. Discussion Papers
Abstract:
This paper offers an informational explanation for asset price booms and crashes. If market fundamentals change, but the length of this process of change is unknown, market participants try to learn about it by observing market outcomes. This learning generates a boom and a crash, which we call `informational overshooting'. The paper applies this idea to real-estate markets, to exchange markets and to stock markets. It shows that entry of a new group of investors to a stock market can generate such a boom and a crash. One implication of this result is that financial liberalizations tend to be followed by stock market booms and crashes.
Keywords: Asset Markets; Booms; Crashes; Information; Rational Expectations (search for similar items in EconPapers)
JEL-codes: D83 G10 (search for similar items in EconPapers)
Date: 1993-09
References: Add references at CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=823 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org
Related works:
Journal Article: Informational overshooting, booms and crashes (2000) 
Journal Article: Informational overshooting, booms, and crashes (1999) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:823
Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... pers/dp.php?dpno=823
Access Statistics for this paper
More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().