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When the bubble bursts: psychology or fundamentals?

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  • Lee E. Ohanian

Abstract

The prices of stocks, bonds, and other assets frequently fluctuate, and sometimes these fluctuations are quite large. Such price shifts have important economic implications, including the possibility that asset prices have predictive power for the business cycle. In this article, Lee Ohanian analyzes the volatility of security prices and discusses whether movements in asset prices reflect changes in the fundamental value of the asset or whether extreme price changes may be associated with changes in market psychology

Suggested Citation

  • Lee E. Ohanian, 1996. "When the bubble bursts: psychology or fundamentals?," Business Review, Federal Reserve Bank of Philadelphia, issue Jan, pages 3-13.
  • Handle: RePEc:fip:fedpbr:y:1996:i:jan:p:3-13
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    File URL: http://www.philadelphiafed.org/research-and-data/publications/business-review/1996/january-february/when-the-bubble-bursts.cfm
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    References listed on IDEAS

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    1. Robert C. Merton, 2005. "Theory of rational option pricing," World Scientific Book Chapters,in: Theory Of Valuation, chapter 8, pages 229-288 World Scientific Publishing Co. Pte. Ltd..
    2. Garman, Mark B. & Kohlhagen, Steven W., 1983. "Foreign currency option values," Journal of International Money and Finance, Elsevier, vol. 2(3), pages 231-237, December.
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    Cited by:

    1. Christopher J. Neely, 1997. "Technical analysis in the foreign exchange market: a layman's guide," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 23-38.

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    Keywords

    Prices ; Stock - Prices;

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