NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Rational Finite Bubbles

Franklin Allen, Gary Gorton

NBER Working Paper No. 3707
Issued in May 1991
NBER Program(s):   ME

There has been a long-running debate about whether stock market prices are determined by fundamentals. To date no consensus has been reached. An important issue in this debate concerns the circumstances in which deviations from fundamentals are consistent with rational behavior. A continuous-time example where there are a finite number of rational traders with finite wealth is presented. it is shown that a finitely-lived security can trade above its fundamental.

download in pdf format
   (371 K)

email paper

This paper is available as PDF (371 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w3707

Published: Allen, Franklin and Gary Gorton. Churning Bubbles." Review of Economic Studies 60, 4 no. 205 (October 1993): 813-836.

Users who downloaded this paper also downloaded these:
Blanchard and Watson w0945 Bubbles, Rational Expectations and Financial Markets
Donaldson w16487 Railroads of the Raj: Estimating the Impact of Transportation Infrastructure
Allen and Gorton w3862 Stock Price Manipulation, Market Microstructure and Asymmetric Information
West w2067 A Specification Test for Speculative Bubbles
Froot and Obstfeld w3091 Intrinsic Bubbles: The Case of Stock Prices
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us