Speculative Dynamics

David Cutler, James Poterba and Lawrence Summers

No 3242, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper presents evidence on the characteristic speculative dynamics of a wide range of asset returns. It highlights three stylized facts. First, returns tend to be positively serially correlated at high frequency. Second, returns tend to be negatively serially correlated over long horizons. Third, deviations of asset values from proxies for fundamental value have predictive power for returns. These patterns emerge repeatedly in our analyses of stocks, bonds, foreign exchange, real estate, collectibles, and precious metals, and they appear too strong to be attributed only to small sample biases. The pervasive nature of these patterns suggests that they may be lie to inherent features of the speculative process, rather than to variation in risk factors which affect particular markets.

Date: 1990-01
Note: ME EFG
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Citations: View citations in EconPapers (15)

Published as Review of Economic Studies 58(3): 529-546, May 1991.

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Journal Article: Speculative Dynamics (1991)
Working Paper: SPECULATIVE DYNAMICS (1990)
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