Rational panics and stock market crashes |
| |
Authors: | Gadi Barlevy Pietro Veronesi |
| |
Affiliation: | a Department of Economics, Northwestern University, Evanston, IL 60208, USA;b Graduate School of Business, University of Chicago, Chicago, IL 60637, USA |
| |
Abstract: | This paper offers an explanation for stock market crashes which focuses on the role of rational but uninformed traders. We show that uninformed traders can precipitate a price crash because as prices decline, they surmise that informed traders received negative information, which leads them to reduce their demand for assets and drive the price of stocks even lower. The model yields several implications, such as that crashes can occur even when the fundamentals are strong, and that the magnitude of the crash depends on the fraction of uninformed investors and the amount of unsophisticated passive investing present in the market. |
| |
Keywords: | Information effect Asymmetric information Crashes |
本文献已被 ScienceDirect 等数据库收录! |
|