EconPapers    
Economics at your fingertips  
 

Trading Frenzies and their Impact on Real Investment

Itay Goldstein (), Emre Ozdenoren and Kathy Yuan

FMG Discussion Papers from Financial Markets Group

Abstract: We study a model where a capital provider learns from the price of a firm’s security in deciding how much capital to provide for new investment. This feedback effect from the financial market to the investment decision gives rise to trading frenzies, where speculators all wish to trade like others, generating large pressure on prices. Coordination among speculators is sometimes desirable for price informativeness and investment efficiency, but speculators’ incentives push in the opposite direction, so that they coordinate exactly when it is undesirable. We analyse the effect of various market parameters on the likelihood of trading frenzies to arise.

Date: 2011-02
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.lse.ac.uk/fmg/workingPapers/discussionP ... _TradingFrenzies.pdf (application/pdf)

Related works:
Journal Article: Trading frenzies and their impact on real investment (2013) Downloads
Working Paper: Trading frenzies and their impact on real investment (2011) Downloads
Working Paper: Trading Frenzies and Their Impact on Real Investment (2010) Downloads
Working Paper: Trading Frenzies and Their Impact on Real Investment (2010)
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:fmg:fmgdps:dp670

Access Statistics for this paper

More papers in FMG Discussion Papers from Financial Markets Group
Bibliographic data for series maintained by The FMG Administration ().

 
Page updated 2024-07-15
Handle: RePEc:fmg:fmgdps:dp670