There have been enormous differences of opinion between U.S. and Japanese institutional investors about the outlook for stock prices, differences across the two countries in average one-year-ahead forecasts for the Japanese stock market as great as twenty percentage points. In the past two years...

We propose a framework for understanding recurrent historical episodes of vigorous economic expansion accompanied by extreme asset valuations, as exhibited by the U.S. in the 1990s. We interpret this phenomenon as a high-valuation equilibrium with a low effective cost of capital based on...

A number of countries have delayed the opening of their capital markets to internationalquot; investment because of reservations about the impact of foreign speculators on both expectedquot; returns and market volatility. We propose a cross-sectional time-series model that attempts toquot;...

This paper presents evidence on the characteristic speculative dynamics of a wide range of asset returns. It highlights three stylized facts. First, returns tend to be positively serially correlated at high frequency. Second, returns tend to be negatively serially correlated over long horizons....

Recent empirical research has identified a significant amount of volatility in stock prices that cannot be easily explained by changes in fundamentals; one interpretation is that asset prices respond not only to news but also to irrational "noise trading." We assess the welfare effects and...

This is a summary and interpretation of some of the literature on stock price volatility that was stimulated by Leroy and Porter (1981) and Shiller (1981a). It appears that neither small sample bias, rational bubbles nor some standard models for expected returns adequately explain stock price...

We provide a model for why high beta assets are more prone to speculative overpricing than low beta ones. When investors disagree about the common factor of cash-flows, high beta assets are more sensitive to this macro-disagreement and experience a greater divergence-of-opinion about their...

Noise traders are agents whose theoretical existence has been hypothesized as a way of solving certain fundamental problems in Financial Economics. We briefly review the literature on noise traders. The is an entry for The New Palgrave: A Dictionary of Economics, 2nd Edition (Palgrave Macmillan:...

The set of parameters needed to calculate the expected present discounted value of a stream of dividends can be estimated in two ways. One may test for speculative bubbles, or fads, by testing whether the two estimates are the same. When the test is applied to some annual U.S. stock market data,...