Manipulating market sentiment

Piccione, Michele and Spiegler, Ran (2014) Manipulating market sentiment. Economics Letters, 122 (2). pp. 370-373. ISSN 0165-1765

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Abstract

We analyze a simple model of an asset market, in which a large rational trader interacts with “noise speculators” who seek short-run speculative gains, and become active following a prolonged episode of mispricing relative to the asset’s fundamental value. The model gives rise to price patterns such as bubble dynamics, positive short-run correlation and vanishing long-run correlation of price deviations from the fundamental value. We argue that this example model sheds light on the question as to whether rational speculators abet or curb price fluctuations.

Item Type:	Article
Official URL:	http://www.journals.elsevier.com/economics-letters...
Additional Information:	© 2014 Elsevier B.V.
Divisions:	Economics STICERD
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HG Finance
Date Deposited:	10 Feb 2014 17:25
Last Modified:	29 Sep 2025 23:17
Projects:	230251
Funders:	European Research Council
URI:	http://eprints.lse.ac.uk/id/eprint/55631

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