This paper uses a noisy rational expectations model to derive predictions about the dynamic behaviour of the proportion of institutional money managers in a given country who are bullish about the equity market in different countries. The predictions are tested using monthly data for four...

We offer a model in which sequences of individuals often converge upon poor decisions and are prone to fads, despite communication of the payoff outcomes from past choices. This reflects both direct and indirect action-based information externalities. In contrast with previous cascades...

We offer a model to explain why groups of people sometimes converge upon poor decisions and are prone to fads, even though they can discuss the outcomes of their choices. Models of informational herding or cascades have examined how rational individuals learn by observing predecessors' actions,...

"This paper presents a new method to examine the performance evaluation of mutual funds in incomplete markets. Based on the no arbitrage condition, we develop bounds on admissible performance measures. We suggest new ways of ranking mutual funds and provide a diagnostic instrument for evaluating...

This paper examines four alternative product strategies available to an innovating firm in markets with network effects: single-product monopoly, technology licensing, product-line extension, and a combination of licensing and product-line extension. We address three questions. First, what...

We show that the infinite regression problem in models with differentially informed traders can be solved using a fixed point method, which we can use to derive the dynamic equilibrium in a multi-auctions model with diversely informed traders. We find that when the informed traders’...

We analyze the effects of differences of opinion on the dynamics of trading volume in stocks and options. We find that disagreements about the mean of the current- and next-period public information lead to trading in stocks in the current period but have no effect on options trading. Without...

When information about fundamentals is symmetric, can information-based trade still arise? Consider bond and foreign exchange (FX) markets, where private information about nominal cash flows is generally absent, but participants are convinced that superior information exists. We analyze a class...