Rational equity bubbles
AbstractThis paper discusses the existence of a bubble in the pricing of an asset that pays positive dividends. I show that rational bubbles can exist in a growing economy. The existence of bubbles depends on the relative magnitudes of risk aversion to consumption and to wealth. Furthermore, I examine how an exogenous shock in technology might trigger bubbles.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 39398.
Date of creation: 11 Jun 2012
Date of revision:
bubbles; the spirit of capitalism; growth;
Find related papers by JEL classification:
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-06-25 (All new papers)
- NEP-MAC-2012-06-25 (Macroeconomics)
- NEP-UPT-2012-06-25 (Utility Models & Prospect Theory)
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