Cookies?
Library Header Image
LSE Research Online LSE Library Services

Asymmetric price movements and borrowing constraints: a rational expectations equilibrium model of crises, contagion, and confusion

Yuan, Kathy (2005) Asymmetric price movements and borrowing constraints: a rational expectations equilibrium model of crises, contagion, and confusion. Journal of Finance, 60 (1). pp. 379-411. ISSN 0022-1082

Full text not available from this repository.

Abstract

This study proposes a rational expectations equilibrium model of crises and contagion in an economy with information asymmetry and borrowing constraints. Consistent with empirical observations, the model finds: (1) Crises can be caused by small shocks to fundamentals; (2) market return distributions are asymmetric; and (3) correlations among asset returns tend to increase during crashes. The model also predicts: (1) Crises and contagion are likely to occur after small shocks in the intermediate price region; (2) the skewness of asset price distributions increases with information asymmetry and borrowing constraints; and (3) crises can spread through investor borrowing constraints.

Item Type: Article
Official URL: http://www.afajof.org/
Additional Information: © 2005 The American Finance Association
Divisions: Finance
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
JEL classification: C - Mathematical and Quantitative Methods > C5 - Econometric Modeling
D - Microeconomics > D5 - General Equilibrium and Disequilibrium > D58 - Computable and Other Applied General Equilibrium Models
G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing; Trading volume; Bond Interest Rates
Date Deposited: 10 Nov 2011 11:31
Last Modified: 04 Jan 2024 06:03
URI: http://eprints.lse.ac.uk/id/eprint/39405

Actions (login required)

View Item View Item