Chasing noise

We present a simple model in which rational but uninformed traders occasionally chase noise as if it were information, thereby amplifying sentiment shocks and moving prices away from fundamental values. In the model, noise traders can have an impact on market equilibrium disproportionate to their size in the market. The model offers a partial explanation for the surprisingly low market price of financial risk in the spring of 2007.     

Afghanistan,Networks and Connectivity

Afghanistan is often thought to be a failed state because it is isolated from the networks of globalisation: for example, Afghanistan is viewed as part of Thomas Barnett's Non-Integrating Gap. On the contrary, the article will show that Afghanistan has – for decades – been very much integrated into a range of international networks. These networks have played major roles in Afghanistan and have also spread to have significant impact across the world: offering an example of what Friedman has referred to as the flattening of the world. Afghanistan is thus an example of the substantial role which networks and connectivity can play in ‘failed’ states and of the unpredictable outcomes that can result from such networks.