Bubbles, crashes and risk
A restricted-perceptions equilibrium exists in which risk-averse agents believe stock prices follow a random walk with a conditional variance that is self-fulfilling. When agents estimate risk, bubbles and crashes arise. These effects are stronger when agents allow for ARCH in excess returns.
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- Wiliam Branch & George W. Evans, .
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- Greenwood, Robin Marc & Shleifer, Andrei, 2014. "Expectations of Returns and Expected Returns," Scholarly Articles 11880390, Harvard University Department of Economics.
- Marius Jurgilas & Kevin J. Lansing, 2012. "Housing bubbles and homeownership returns," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue jun25.
- Gaunersdorfer, Andrea, 2000. "Endogenous fluctuations in a simple asset pricing model with heterogeneous agents," Journal of Economic Dynamics and Control, Elsevier, vol. 24(5-7), pages 799-831, June.
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