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https://scholarbank.nus.edu.sg/handle/10635/173008
Title: | Coordinated Bubbles and Crashes | Authors: | ZHENG HUANHUAN | Keywords: | coordination games bubbles Market efficiency |
Issue Date: | 17-Aug-2020 | Citation: | ZHENG HUANHUAN (2020-08-17). Coordinated Bubbles and Crashes. Journal of Economic Dynamic and Control. ScholarBank@NUS Repository. | Abstract: | In a market with information friction, investors strategically consider the actions of others and evolutionarily switch between fundamental and technical strategies to maximize their payoffs. The collective actions of all investors exert feedback on asset price, which affects investors’ subsequent actions. We find that investors have the incentive to adopt fundamental strategy to restore market efficiency only if the mispricing is sufficiently large. When investors fail to coordinate on the fundamental strategy, market inefficiency increases, which blows the bubble. As market inefficiency grows, the coordination on fundamental strategy strengthens, which eventually bursts the bubble. | Source Title: | Journal of Economic Dynamic and Control | URI: | https://scholarbank.nus.edu.sg/handle/10635/173008 |
Appears in Collections: | Elements Staff Publications |
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Zheng Huanhuan - Coordinated Bubbles and Crashes (ul0720).pdf | 536.26 kB | Adobe PDF | OPEN | Pre-print | View/Download |
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