TY  - JOUR
AU  - Long,J. Bradford De
AU  - Shleifer,Andrei
AU  - Summers,Lawrence H.
AU  - Waldmann,Robert J.
TI  - Positive Feedback Investment Strategies and Destabilizing Rational Speculation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 2880
PY  - 1989
Y2  - March 1989
UR  - http://www.nber.org/papers/w2880
L1  - http://www.nber.org/papers/w2880.pdf
N1  - Author contact info:
J. Bradford DeLong
Department of Economics
601 Evans Hall
University of California, Berkeley
Berkeley, CA 94720-3880
Tel: 510/643-4027
Fax: 510/642-6615
E-Mail: delong@econ.berkeley.edu

Andrei Shleifer
Department of Economics
Harvard University
Littauer Center M-9
Cambridge, MA 02138
Tel: 617/495-5046
Fax: 617/496-1708
E-Mail: ashleifer@harvard.edu

Lawrence H. Summers
Harvard Kennedy School of Government
79 JFK Street
Cambridge, MA 02138
Tel: 617/495-9322
Fax: 617/495-0436
E-Mail: lhs@harvard.edu
AB  - Analyses of the role of rational speculators in financial markets usually presume that such investors dampen price fluctuations by trading against liquidity or noise traders. This conclusion does not necessarily hold when noise traders follow positive-feedback investment strategies buy when prices rise and sell when prices fall. In such cases, it may pay rational speculators to try to jump on the bandwagon early and to purchase ahead of noise trader demand. If rational speculators' attempts to jump on the bandwagon early trigger positive-feedback investment strategies, then an increase in the number of forward-looking rational speculators can lead to increased volatility of prices about fundamentals.
ER  -