On the Dynamics of Speculation in a Model of Bubbles and Manias
Carlos Pérez () and
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Manuel Santos: University of Miami
No 2017-02, Working Papers from University of Miami, Department of Economics
We present an asset-trading model of `boom and bust' with homogeneous information. Our model builds on narrative accounts of asset pricing bubbles that hint at the interaction between behavioral and rational traders. A bubble emerges only if a mania could develop: behavioral traders temporarily outweigh rational traders with positive probability. We characterize the various phases of speculative behavior, and analyze how they may vary with changes in primitive parameters, asymmetric information, a single rational trader, and the arrival of new information.
Keywords: Bubbles; manias; behavioral trading; smart money; preemption game Publication Status: Ex. Under Review (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mst and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:mia:wpaper:2017-02
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