Irrational exuberance and herding in financial markets

Arbeitspapier

In the context of a two-state, two-trader financial market herd model introduced by Avery and Zemsky (1998) we investigate how informational ambiguity in conjunction with waves of optimism and pessimism affect investor behavior, social learning and price dynamics. Without ambiguity, neither herding nor contrarianism is possible. If there is ambiguity and agents have invariant ambiguity preferences, only contrarianism is possible. If on the other hand ambiguity is high and traders become overly exuberant (or desperate) as the asset price surges (or plummets), we establish that investor herding may drive prices away from fundamentals with economically relevant probability.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: SFB 649 Discussion Paper ; No. 2016-016

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Criteria for Decision-Making under Risk and Uncertainty ; Asymmetric and Private Information; Mechanism Design ; Asset Pricing; Trading Volume; Bond Interest Rates ; Information and Market Efficiency; Event Studies; Insider Trading
• Thema: Social Learning ; Herding ; Contrarianism ; (Partial) Informational Cascade ; Ambiguity ; Choquet Expected Utility ; NEO-Additive Capacities

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Boortz, Christopher
• Ereignis: Veröffentlichung
• (wer): Humboldt University of Berlin, Collaborative Research Center 649 - Economic Risk
• (wo): Berlin
• (wann): 2016

Weitere Informationen

• Handle: http://hdl.handle.net/10419/146185
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ