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Positive Feedback Investment Strategies and Destabilizing Rational Speculation / J. Bradford De Long, Andrei Shleifer, Lawrence H. Summers, Robert J. Waldmann.
- Format:
- Book
- Author/Creator:
- De Long, J. Bradford.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w2880.
- NBER working paper series no. w2880
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1989.
- Summary:
- Analyses of the role of rational speculators in financial markets usually presume that such investors dampen price fluctuations by trading against liquidity or noise traders. This conclusion does not necessarily hold when noise traders follow positive-feedback investment strategies buy when prices rise and sell when prices fall. In such cases, it may pay rational speculators to try to jump on the bandwagon early and to purchase ahead of noise trader demand. If rational speculators' attempts to jump on the bandwagon early trigger positive-feedback investment strategies, then an increase in the number of forward-looking rational speculators can lead to increased volatility of prices about fundamentals.
- Notes:
- Print version record
- March 1989.
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