Ozdenoren, Emre and Yuan, Kathy 
ORCID: 0000-0001-9895-7545
(2008)
Feedback effects and asset prices.
Journal of Finance, 63 (4).
pp. 1939-1975.
ISSN 0022-1082
Abstract
Feedback effects from asset prices to firm cash flows have been empirically documented. This finding raises a question for asset pricing: How are asset prices determined if price affects fundamental value, which in turn affects price? In this environment, by buying assets that others are buying, investors ensure high future cash flows for the firm and subsequent high returns for themselves. Hence, investors have an incentive to coordinate, which may generate self-fulfilling beliefs and multiple equilibria. Using insights from global games, we pin down investors' beliefs, analyze equilibrium prices, and show that strong feedback leads to higher excess volatility.
| Item Type: | Article |
|---|---|
| Official URL: | http://www.afajof.org/journal/browse.asp |
| Additional Information: | © 2008 Blackwell Publishing |
| Divisions: | Finance |
| Subjects: | H Social Sciences > HG Finance |
| Date Deposited: | 08 Feb 2011 16:04 |
| Last Modified: | 01 Oct 2024 03:35 |
| URI: | http://eprints.lse.ac.uk/id/eprint/32305 |
Actions (login required)
 |
View Item |
