Please use this identifier to cite or link to this item: 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
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