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This paper presents an investigation on the dynamics of prices, information and expectations in a competitive, noisy, dynamic asset pricing equilibrium model. This paper shows that the prices are farther away from (closer to) fundamental compared with average expectations if and only if traders over- (under-) rely on public information with respect to optimal statistical weights. Both phenomena, in turn, occur whenever traders speculate on short-run price movements. For a given, positive level of residual payoff uncertainty, over-reliance on public information obtains if noise trade displays low persistence. This defines a "Keynesian" region; the complementary region is "Hayekian" in that prices are systematically closer to fundamentals than average expectations. The analysis explains accommodation and trend chasing strategies as well as momentum and reversal.
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