Speculative dynamics and the role of feedback traders

Author / Creator

Cutler, David M

Available as

Online

Summary

This paper summarizes our earlier research documenting the characteristic speculative dynamics of many asset markets and suggests a framework for understanding them. Our model incorporates "feedbac...

This paper summarizes our earlier research documenting the characteristic speculative dynamics of many asset markets and suggests a framework for understanding them. Our model incorporates "feedback traders," traders whose demand is based on the history of past returns rather than the expectation of future fundamentals. We use this framework to describe ways in which the characteristic return patterns might be generated, and also to address the long-standing question of whether profitable speculation stabilizes asset markets

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