NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Rational Asset Price Movements Without News

David Romer

NBER Working Paper No. 4121
Issued in July 1992
NBER Program(s):   AP

This paper argues that an important part of movements in asset prices may be caused by neither external news nor irrationality, but the by revelation of information by the trading process itself. Two models are developed that illustrate this general idea. One model is based on investor uncertainty about the quality of other investors' information: the other is based on widespread dispersion of information and small costs to trading. The analysis is used to suggest a possible rational explanation of the October 1987 crash.

download in pdf format
   (3503 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w4121

Published: American Economic Review, vol 83, (5), pp. 1112-1130 (December 1993) citation courtesy of

Users who downloaded this paper also downloaded* these:
Cheremukhin, Golosov, Guriev, and Tsyvinski w21397 The Economy of People’s Republic of China from 1953
Bernanke and Gertler w7559 Monetary Policy and Asset Price Volatility
Cutler, Poterba, and Summers w2538 What Moves Stock Prices?
Grossman w2357 An Analysis of the Implications for Stock and Futures Price Volatility of Program Trading and Dynamic Hedging Strategies
Shiller w2446 Investor Behavior in the October 1987 Stock Market Crash: Survey Evidence
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

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

Contact Us