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Market Crashes Without External Shocks

Author

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  • Sergiu Hart

    (The Hebrew University of Jerusalem)

  • Yair Tauman

    (Tel-Aviv University and SUNY at Stony Brook)

Abstract

It is shown here that market crashes and bubbles can arise without external shocks. Sudden changes in behavior coming after a long period of stationarity may be the result of endogenous information processing. Except for the daily observation of the market, there is no new information, no communication and no coordination among the participants.

Suggested Citation

  • Sergiu Hart & Yair Tauman, 1997. "Market Crashes Without External Shocks," Game Theory and Information 9703009, University Library of Munich, Germany, revised 25 Nov 1997.
    • Handle: RePEc:wpa:wuwpga:9703009
    Note: December 1996. Revised: October 1997. Scientific Word 2.5 + 1 table (Excel). Also available at URL below.
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    References listed on IDEAS

    as
    1. Geanakoplos, John, 1994. "Common knowledge," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 2, chapter 40, pages 1437-1496, Elsevier.
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    Cited by:

    1. Timothy Mathews & Aniruddha Bagchi, 2019. "Conflict without an Apparent Cause," Games, MDPI, vol. 10(4), pages 1-12, October.
    2. Gisèle Umbhauer & Arnaud Wolff, 2022. "istance in Beliefs and Individually-Consistent Sequential Equilibrium," Working Papers of BETA 2022-37, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    3. Oscar Volij, 2000. "Communication, credible improvements and the core of an economy with asymmetric information," International Journal of Game Theory, Springer;Game Theory Society, vol. 29(1), pages 63-79.
    4. Ziv Hellman, 2012. "Deludedly Agreeing to Agree," Discussion Paper Series dp605, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
    5. Felipe Zurita, 2004. "Essays on Speculation," Levine's Working Paper Archive 618897000000000849, David K. Levine.
    6. Zeckhauser Richard, 2006. "Investing in the Unknown and Unknowable," Capitalism and Society, De Gruyter, vol. 1(2), pages 1-41, September.

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    More about this item

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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