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

This paper is available as PDF (3503 K) or via email.

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)

Users who downloaded this paper also downloaded these:
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
Bernanke and Gertler w7559 Monetary Policy and Asset Price Volatility
Romer and Romer w9866 A New Measure of Monetary Shocks: Derivation and Implications
 
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