Asset Float and Speculative Bubbles
We model the relationship between asset float (tradeable shares) and speculative bubbles. Investors with heterogeneous beliefs and short-sales constraints trade a stock with limited float because of insider lockups. A bubble arises as price overweighs optimists' beliefs and investors anticipate the option to resell to those with even higher valuations. The bubble's size depends on float as investors anticipate an increase in float with lockup expirations and speculate over the degree of insider selling. Consistent with the internet experience, the bubble, turnover, and volatility decrease with float and prices drop on the lockup expiration date. Copyright 2006 by The American Finance Association.
Year of publication: |
2006
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Authors: | HONG, HARRISON ; SCHEINKMAN, JOSÉ ; XIONG, WEI |
Published in: |
Journal of Finance. - American Finance Association - AFA, ISSN 1540-6261. - Vol. 61.2006, 3, p. 1073-1117
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Publisher: |
American Finance Association - AFA |
Saved in:
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