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Coordinated Investing with Feedback and Learning

  • David Goldbaum

    ()

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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File URL: http://www.rutgers-newark.rutgers.edu/econnwk/workingpapers/2004-008.pdf
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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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  1. 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.
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  8. Froot, Kenneth A & Scharftstein, David S & Stein, Jeremy C, 1992. " Herd on the Street: Informational Inefficiencies in a Market with Short-Term Speculation," Journal of Finance, American Finance Association, vol. 47(4), pages 1461-84, September.
  9. Dixit, Avinash & Mirrlees, James A & Stern, Nicholas, 1975. "Optimum Saving with Economies of Scale," Review of Economic Studies, Wiley Blackwell, vol. 42(3), pages 303-25, July.
  10. Banerjee, Abhijit V, 1992. "A Simple Model of Herd Behavior," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 797-817, August.
  11. V. V. Chari & Patrick J. Kehoe, 2003. "Hot Money," Levine's Bibliography 506439000000000415, UCLA Department of Economics.
  12. Dollar, David, 2002. "Reform, growth, and poverty in Vietnam," Policy Research Working Paper Series 2837, The World Bank.
  13. 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.
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  15. Moretto, Michele, 2000. "Irreversible investment with uncertainty and strategic behavior," Economic Modelling, Elsevier, vol. 17(4), pages 589-617, December.
  16. Nicholas Barberis & Andrei Shleifer, 2000. "Style Investing," NBER Working Papers 8039, National Bureau of Economic Research, Inc.
  17. 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.
  18. Marcet, Albert & Sargent, Thomas J., 1989. "Convergence of least squares learning mechanisms in self-referential linear stochastic models," Journal of Economic Theory, Elsevier, vol. 48(2), pages 337-368, August.
  19. Meigas, Helo, 2001. "Using development-oriented equity investment as a tool for restructuring transition banking sectors," Policy Research Working Paper Series 2723, The World Bank.
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