Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/146185
Authors: 
Boortz, Christopher
Year of Publication: 
2016
Series/Report no.: 
SFB 649 Discussion Paper 2016-016
Abstract: 
In the context of a two-state, two-trader financial market herd model introduced by Avery and Zemsky (1998) we investigate how informational ambiguity in conjunction with waves of optimism and pessimism affect investor behavior, social learning and price dynamics. Without ambiguity, neither herding nor contrarianism is possible. If there is ambiguity and agents have invariant ambiguity preferences, only contrarianism is possible. If on the other hand ambiguity is high and traders become overly exuberant (or desperate) as the asset price surges (or plummets), we establish that investor herding may drive prices away from fundamentals with economically relevant probability.
Subjects: 
Social Learning
Herding
Contrarianism
(Partial) Informational Cascade
Ambiguity
Choquet Expected Utility
NEO-Additive Capacities
JEL: 
D81
D82
G12
G14
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.