Speculative investor behavior and learning
AbstractAs traders learn about the true distribution of some asset's dividends, a speculative premium occurs as each trader anticipates the possibility of re-selling the asset to another trader before complete learning has occurred. Small differences in prior beliefs lead to large speculative premiums during the learning process. This phenomenon helps explain a paradox concerning the pricing of initial public offerings. The result casts light on the significance of the common prior assumption in economic models.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 96-5.
Date of creation: 1996
Date of revision:
Other versions of this item:
- Stephen Morris, . "Speculative Investor Behavior and Learning," Penn CARESS Working Papers d12f7936881423171f6589501, Penn Economics Department.
- Stephen Morris, . ""Speculative Investor Behavior and Learning''," CARESS Working Papres 95-13, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
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