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Major bubble episodes are rare events. In this paper, we examine what factors might cause some asset price bubbles to become very large. We recreate, in a laboratory setting, some of the specific institutional features investors in the South Sea Company faced in 1720. Several factors have been...
Persistent link: https://www.econbiz.de/10010933539
the speculative term must be orthogonal to public information in real time and therefore statistically distinct from risk … yields. Furthermore, estimates of historical risk premia from the heterogeneous information model are less volatile than, and …
Persistent link: https://www.econbiz.de/10010929585
This paper studies the relationship between the amount of public information that stock market prices incorporate and … vectors of assets accessing multidimensional information under two alternative market structures. In the first (the … want to trade. I show that informed traders’ incentives to exploit multidimensional private information depend on the …
Persistent link: https://www.econbiz.de/10005704851
The paper analyzes the effects of strategic behavior by an insider in a price discovery process, akin to an information … evidence available, we find that information revelation accelerates close to the opening, that the market price does not …
Persistent link: https://www.econbiz.de/10005707988
Emerging market crises are characterized by large swings in both macroeconomic fundamentals and asset prices. The economic significance of observed movements in macroeconomic variables is obscured by the brief and extreme nature of crises. In this paper we propose to study the macroeconomic...
Persistent link: https://www.econbiz.de/10005707990
reaction to information arrival and, owing to risk aversion, scale back their trading intensity. This, in turn, reduces both … risk sharing and information impounding into prices enforcing a high returns' volatility-low price informativeness …
Persistent link: https://www.econbiz.de/10005707997
We introduce a new dynamic trading strategy based on the systematic misspricing of U.S. companies sponsoring Defined Benefit pension plans. This portfolio produces an average return of 1.51% monthly between 1989 and 2004, with a Sharpe Ratio of 0.26. The returns of the strategy are not explained...
Persistent link: https://www.econbiz.de/10005772008
phenomenon based on trading constraints and asymmetric information. We test our hypothesis against competing stories such as …. Finally we provide new evidence regarding crashes and the degree of information asymmetry. …
Persistent link: https://www.econbiz.de/10005772066
The paper argues that the market signifficantly overvalues firms with severely underfunded pension plans. These companies earn lower stock returns than firms with healthier pension plans for at least five years after the first emergence of the underfunding. The low returns are not explained by...
Persistent link: https://www.econbiz.de/10005772159
We explore the role of corporate insiders vs. firms as traders of last resort. We develop a simple model of insider trading in which insiders provide price support, as well as liquidity, in security markets. Consistent with the model predictions we find that in the US markets insiders’ trading...
Persistent link: https://www.econbiz.de/10005772333