Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

As long as there have been financial markets, there have been bubbles-those moments in which asset prices inflate far beyond their intrinsic value, often with ruinous results. Yet economists are slow to agree on the underlying forces behind these events. In this book José A. Scheinkman offers new insight into the mystery of bubbles. Noting some general characteristics of bubbles-such as the rise in trading volume and the coincidence between increases in supply and bubble implosions-Scheinkman offers a model, based on differences in beliefs among investors, that explains these observations. Other top economists also offer their own thoughts on the issue: Sanford J. Grossman and Patrick Bolton expand on Scheinkman's discussion by looking at factors that contribute to bubbles-such as excessive leverage, overconfidence, mania, and panic in speculative markets-and Kenneth J. Arrow and Joseph E. Stiglitz contextualize Scheinkman's findings.

Speculation --- Investments --- Capital market --- Stocks --- Common shares --- Common stocks --- Equities --- Equity capital --- Equity financing --- Shares of stock --- Stock issues --- Stock offerings --- Stock trading --- Trading, Stock --- Securities --- Bonds --- Corporations --- Going public (Securities) --- Stock repurchasing --- Stockholders --- Capital markets --- Market, Capital --- Finance --- Financial institutions --- Loans --- Money market --- Crowding out (Economics) --- Efficient market theory --- Investing --- Investment management --- Portfolio --- Disinvestment --- Saving and investment --- History. --- Prices

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

Asset prices contain information about the probability distribution of future states and the stochastic discounting of these states. Without additional assumptions, probabilities and stochastic discounting cannot be separately identified. Ross (2013) introduced a set of assumptions that restrict the dynamics of the stochastic discount factor in a way that allows for the recovery of the underlying probabilities. We use decomposition results for stochastic discount factors from Hansen and Scheinkman (2009) to explain when this procedure leads to misspecified recovery. We also argue that the empirical evidence on asset prices indicates that the recovered measure would differ substantially from the actual probability distribution and that interpreting this measure as the true probability distribution may severely bias our inference about risk premia, investors' aversion to risk, and the welfare cost of economic fluctuations.

Zonder onderwerpscode: economie

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

We construct shock elasticities that are pricing counterparts to impulse response functions. Recall that impulse response functions measure the importance of next-period shocks for future values of a time series. Shock elasticities measure the contributions to the price and to the expected future cash flow from changes in the exposure to a shock in the next period. They are elasticities because their measurements compute proportionate changes. We show a particularly close link between these objects in environments with Brownian information structures.