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Modern Approaches to Asset Price Formation: A Survey of Recent Theoretical Literature

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Tro Kortian (Reserve Bank of Australia)

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Abstract

In recent years, there has been much re-assessment and re-evaluation by academic economists of the Efficient Markets Hypothesis. The traditional view, stressing the ability of speculative markets to keep asset prices in line with economic fundamentals, has been challenged by an approach more sympathetic to the role of self-fulfilling expectations, psychology, herd behaviour and other seemingly irrational influences on asset prices. Greater appreciation of the institutional features of real-world asset markets also distinguishes this modern approach. The paper summarises this influential and rapidly-growing body of theoretical literature on asset price formation.

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Paper provided by Reserve Bank of Australia in its series RBA Research Discussion Papers with number rdp9501.

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Date of creation: Mar 1995
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Handle: RePEc:rba:rbardp:rdp9501

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Alberto Montagnoli & Oreste Napolitano, 2005. "Financial Condition Index And Interest Rate Settings: A Comparative Analysis," Working Papers 8_2005, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy. [Downloadable!]
    Other versions:
  2. Alexandros Kontonikas & Alberto Montagnoli, 2003. "Optimal Monetary Policy and Asset Price Misalignments," Public Policy Discussion Papers 03-22, Economics and Finance Section, School of Social Sciences, Brunel University. [Downloadable!]
    Other versions:
  3. Maria Grazia Romano, 2004. "Learning, Cascades and Transaction Costs," CSEF Working Papers 123, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy. [Downloadable!]
    Other versions:
  4. Alexandra Lai, 2002. "Modelling Financial Instability: A Survey of the Literature," Working Papers 02-12, Bank of Canada. [Downloadable!]
  5. Michael Andersen & Robert Subbaraman, 1996. "Share Prices and Investment," RBA Research Discussion Papers rdp9610, Reserve Bank of Australia. [Downloadable!]
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