Bubbles, crashes and risk

A restricted-perceptions equilibrium exists in which risk-averse agents believe stock prices follow a random walk with a conditional variance that is self-fulfilling. When agents estimate risk, bubbles and crashes arise. These effects are stronger when agents allow for ARCH in excess returns.

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Year of publication:	2013
Authors:	Branch, William A. ; Evans, George W.
Published in:	Economics Letters. - Elsevier, ISSN 0165-1765. - Vol. 120.2013, 2, p. 254-258
Publisher:	Elsevier
Subject:	Risk \| Asset pricing \| Bubbles \| Adaptive learning

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Type of publication:	Article
Classification:	G12 - Asset Pricing ; G14 - Information and Market Efficiency; Event Studies ; D82 - Asymmetric and Private Information ; D83 - Search, Learning, Information and Knowledge
Source:	RePEc - Research Papers in Economics

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