Intrinsic Bubbles: The Case of Stock Prices / Kenneth A. Froot, Maurice Obstfeld.

Format:

Book

Author/Creator:

Froot, Kenneth A.

Contributor:

National Bureau of Economic Research.

Obstfeld, Maurice.

Series:

Working Paper Series (National Bureau of Economic Research) no. w3091.

NBER working paper series no. w3091

Language:

English

Subjects (All):

Dividends.

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Intrinsic Bubbles

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1989.

Cambridge, Mass. : National Bureau of Economic Research, 1989.

Summary:

Several puzzling aspects of the behavior of United States stock prices can be explained by the presence of a specific type of rational bubble that depends exclusively on dividends. We call such bubbles "intrinsic" bubbles because they derive all of their variability from exogenous economic fundamentals, and none from extraneous factors. Unlike the most popular examples of rational bubbles, intrinsic bubbles provide an empirically plausible account of deviations from present-value pricing. Their explanatory potential comes partly from their ability to generate persistent deviations that appear relatively stable over long periods.

Notes:

Print version record

September 1989.

Includes bibliographical references.