TY  - JOUR
AU  - Allen,Franklin
AU  - Gorton,Gary
TI  - Rational Finite Bubbles
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 3707
PY  - 1991
Y2  - May 1991
UR  - http://www.nber.org/papers/w3707
L1  - http://www.nber.org/papers/w3707.pdf
N1  - Author contact info:
Franklin Allen
Wharton School
University of Pennsylvania
3620 Locust Walk
Philadelphia, PA 19104
Tel: 215/898-3629
Fax: 215/573-2207
E-Mail: allenf@wharton.upenn.edu

Gary B. Gorton
Yale School of Management
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
Fax: 203/432-8931
E-Mail: Gary.Gorton@yale.edu
AB  - 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.
ER  -