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Disinformation and “Bad” Financial Speculations: A Mechanism behind Financial Crises

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  • Harashima, Taiji

Abstract

Some financial speculations are similar to gambling or Ponzi schemes because they are undertaken to extract other people’s economic resources. In this sense, there will be “good” and “bad” financial speculations. In this paper, I construct static and dynamic models of bad speculations and show that an important determinant of the amount of bad speculation is the economic cost (inefficiency) generated, particularly by disinformation that is disseminated for the speculation. The economic cost and amount of bad speculation are influenced by the ability and effort of regulatory authorities, and if that ability largely deteriorates, the amount of bad speculation will greatly increase and a financial crisis will occur. Hence, people must look for signs of deterioration of the ability of the regulatory authority to prevent financial crises.

Suggested Citation

  • Harashima, Taiji, 2025. "Disinformation and “Bad” Financial Speculations: A Mechanism behind Financial Crises," MPRA Paper 124877, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:124877
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    References listed on IDEAS

    as
    1. Robin Greenwood & Samuel G. Hanson, 2013. "Issuer Quality and Corporate Bond Returns," The Review of Financial Studies, Society for Financial Studies, vol. 26(6), pages 1483-1525.
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    5. Harashima, Taiji, 2008. "A Microfounded Mechanism of Observed Substantial Inflation Persistence," MPRA Paper 10668, University Library of Munich, Germany.
    6. Harashima, Taiji, 2010. "Sustainable Heterogeneity: Inequality, Growth, and Social Welfare in a Heterogeneous Population," MPRA Paper 22521, University Library of Munich, Germany.
    7. Harashima, Taiji, 2021. "Economic Inequality and Heterogeneous Success Rates of Investment," MPRA Paper 110688, University Library of Munich, Germany.
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    9. Harashima, Taiji, 2024. "Disinformation and Mutual Trust: An Economic Model," MPRA Paper 121865, University Library of Munich, Germany.
    10. Harashima, Taiji, 2025. "Disinformation, Benefit of Group Membership, and Conscience: An Economic Model," MPRA Paper 124120, University Library of Munich, Germany.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Disinformation; Financial crisis; Financial regulation; Inefficiency; Speculation;
    All these keywords.

    JEL classification:

    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G01 - Financial Economics - - General - - - Financial Crises
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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