TY  - JOUR
AU  - Hong,Harrison
AU  - Scheinkman,Jose
AU  - Xiong,Wei
TI  - Asset Float and Speculative Bubbles
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11367
PY  - 2005
Y2  - May 2005
UR  - http://www.nber.org/papers/w11367
L1  - http://www.nber.org/papers/w11367.pdf
N1  - Author contact info:
Harrison Hong
Department of Economics
Princeton University
26 Prospect Avenue
Princeton, NJ 08540
Tel: 609/258-0259
Fax: 609/258-0771
E-Mail: hhong@princeton.edu

Jose A. Scheinkman
Department of Economics
Princeton University
Princeton, NJ  08544-1021
Tel: 609/258-4020
Fax: 609/258-0771
E-Mail: joses@princeton.edu

Wei Xiong
Princeton University
Department of Economics
Bendheim Center for Finance
Princeton, NJ  08450
Tel: 609/258-0282
Fax: 609/258-0771
E-Mail: wxiong@princeton.edu
AB  - We model the relationship between asset float (tradeable shares) and speculative bubbles. Investors trade a stock with limited float because of insider lock-ups. They have heterogeneous beliefs due to overconfidence and face short-sales constraints. A bubble arises as price overweighs optimists' beliefs and investors anticipate the option to resell to those with even higher valuations. The bubble's size depends on float as investors anticipate an increase in float with lock-up expirations and speculate over the degree of insider selling. Consistent with the internet experience, the bubble, turnover and volatility decrease with float and prices drop on the lock-up expiration date.
ER  -