As traders learn about the true distribution of some asset's dividends, a speculative premium occurs as each trader anticipates the possibility of re-selling the asset to another trader before complete learning has occurred. Small differences in prior beliefs lead to large speculative premiums...

Jim Poterba finds that consumers do not spend all of their assets during retirement, and he projects that the demand for assets will remain high when the baby boomers retire. Based on his forecast of continued high demand for capital, Poterba rejects the asset market meltdown hypothesis, which...

As the Dow toys with 10,000, investors everywhere are positively giddy. But is this unprecedented growth being driven by fundamentals or black magic?

This Commentary makes a case for Fed action in the event of a stock market bubble. Because stock market prices serve as a signal to business managers to invest, bubbles can mislead managers into investing when it is not profitable. The overinvestment, which becomes apparent after the bubble...

Soaring stock prices continue to pit those who claim that investors are paying too much against those who believe stocks are worth even more. Prices of stocks are determined by people's perceptions of worth, which are themselves based on expectations for the future Although we cannot be sure...

This paper investigates the relations between aggregate trading volume and information on financial markets from a theoretical standpoint. Through numerical examples, it relates some statistics describing equilibrium price and volume--such as the variance of the price and its correlation with...