Barberis, Nicholas and Greenwood, Robin and Jin, Lawrence and Shleifer, Andrei (2018) Extrapolation and bubbles. Journal of Financial Economics, 129 (2). pp. 203-227. ISSN 0304-405X. doi:10.1016/j.jfineco.2018.04.007. https://resolver.caltech.edu/CaltechAUTHORS:20180507-080958460
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Abstract
We present an extrapolative model of bubbles. In the model, many investors form their demand for a risky asset by weighing two signals—an average of the asset’s past price changes and the asset’s degree of overvaluation—and “waver” over time in the relative weight they put on them. The model predicts that good news about fundamentals can trigger large price bubbles, that bubbles will be accompanied by high trading volume, and that volume increases with past asset returns. We present empirical evidence that bears on some of the model’s distinctive predictions.
| Item Type: | Article | |||||||||
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| Additional Information: | © 2018 Elsevier B.V. Received 25 January 2016, Revised 6 February 2017, Accepted 30 May 2017, Available online 4 May 2018. We are grateful to Bill Schwert (the editor), an anonymous referee, Marianne Andries, Alex Chinco, Charles Nathanson, Alp Simsek, Adi Sunderam, and seminar participants at Berkeley, Caltech, Cornell, Northwestern, NYU, Ohio State, Yale, the AEA, the Miami Behavioral Finance Conference, the NBER, and the WFA for very helpful comments. | |||||||||
| Subject Keywords: | Bubble; Extrapolation; Volume | |||||||||
| Issue or Number: | 2 | |||||||||
| Classification Code: | JEL: G02; G11; G12 | |||||||||
| DOI: | 10.1016/j.jfineco.2018.04.007 | |||||||||
| Record Number: | CaltechAUTHORS:20180507-080958460 | |||||||||
| Persistent URL: | https://resolver.caltech.edu/CaltechAUTHORS:20180507-080958460 | |||||||||
| Official Citation: | Nicholas Barberis, Robin Greenwood, Lawrence Jin, Andrei Shleifer, Extrapolation and bubbles, Journal of Financial Economics, Volume 129, Issue 2, 2018, Pages 203-227, ISSN 0304-405X, https://doi.org/10.1016/j.jfineco.2018.04.007. (http://www.sciencedirect.com/science/article/pii/S0304405X18301016) | |||||||||
| Usage Policy: | No commercial reproduction, distribution, display or performance rights in this work are provided. | |||||||||
| ID Code: | 86233 | |||||||||
| Collection: | CaltechAUTHORS | |||||||||
| Deposited By: | Tony Diaz | |||||||||
| Deposited On: | 07 May 2018 17:27 | |||||||||
| Last Modified: | 15 Nov 2021 20:36 |
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