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Coordinated Investing with Feedback and Learning

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Author Info
David Goldbaum ()

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Abstract

Investors select how to distrubute funds between a number of projects. This paper departs from the standard financial market model by endogenizing the intrinsic value of the assets to be dependend upon the amount of funding they attract. Investment strategies based on fundamental and a momentum strategy are compared. Both strategies produce herding characteristics. For the fundamental strategy herding is optimal. The momentum strategy can result in suboptimal economic development, but can also produces greater success for the individual investors utilizing it.

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Publisher Info
Paper provided by Department of Economics, Rutgers University, Newark in its series Working Papers Rutgers University, Newark with number 2004-008.

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Date of creation: Jul 2004
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Handle: RePEc:run:wpaper:2004-008

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Related research
Keywords: Learning; Investment; Growth; Agent-based Computational Economics;

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Find related papers by JEL classification:
C63 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computational Techniques
D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment

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  1. Kenneth A. Froot & David S. Scharfstein & Jeremy C. Stein, 1990. "Herd on the Street: Informational Inefficiencies in a Market with Short-Term Speculation," NBER Working Papers 3250, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Claessens, Stijn & Klingebiel, Daniela & Schmukler, Sergio, 2003. "Government bonds in domestic and foreign currency: the role of macroeconomic and institutional factors," Policy Research Working Paper Series 2986, The World Bank. [Downloadable!]
    Other versions:
  3. De Long, J Bradford, et al, 1990. " Positive Feedback Investment Strategies and Destabilizing Rational Speculation," Journal of Finance, American Finance Association, vol. 45(2), pages 379-95, June. [Downloadable!] (restricted)
    Other versions:
  4. Harrison Hong & Jeremy C. Stein, 1999. "A Unified Theory of Underreaction, Momentum Trading, and Overreaction in Asset Markets," Journal of Finance, American Finance Association, vol. 54(6), pages 2143-2184, December. [Downloadable!] (restricted)
  5. Dollar, David, 2002. "Reform, growth, and poverty in Vietnam," Policy Research Working Paper Series 2837, The World Bank. [Downloadable!]
  6. Barberis, Nicholas & Shleifer, Andrei, 2003. "Style investing," Journal of Financial Economics, Elsevier, vol. 68(2), pages 161-199, May. [Downloadable!] (restricted)
    Other versions:
  7. Grais, Wafik & Kantur, Zeynep, 2003. "The changing financial landscape : opportunities and challenges for the Middle East and North Africa," Policy Research Working Paper Series 3050, The World Bank. [Downloadable!]
  8. Dixit, Avinash & Mirrlees, James A & Stern, Nicholas, 1975. "Optimum Saving with Economies of Scale," Review of Economic Studies, Blackwell Publishing, vol. 42(3), pages 303-25, July. [Downloadable!] (restricted)
  9. Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-45, November. [Downloadable!] (restricted)
  10. Moretto, Michele, 2000. "Irreversible investment with uncertainty and strategic behavior," Economic Modelling, Elsevier, vol. 17(4), pages 589-617, December. [Downloadable!] (restricted)
  11. Hirshleifer, David & Subrahmanyam, Avanidhar & Titman, Sheridan, 1994. " Security Analysis and Trading Patterns When Some Investors Receive Information before Others," Journal of Finance, American Finance Association, vol. 49(5), pages 1665-98, December. [Downloadable!] (restricted)
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This page was last updated on 2009-11-22.

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