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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)

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.

Suggested Citation

  • Tro Kortian, 1995. "Modern Approaches to Asset Price Formation: A Survey of Recent Theoretical Literature," RBA Research Discussion Papers rdp9501, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp9501
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