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Book/Printed Material Beauty contests and irrational exuberance a neoclassical approach

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Title

  • Beauty contests and irrational exuberance a neoclassical approach

Summary

  • "The arrival of new, unfamiliar, investment opportunities is often associated with "exuberant" movements in asset prices and real economic activity. During these episodes of high uncertainty, financial markets look at the real sector for signals about the profitability of the new investment opportunities, and vice versa. In this paper, we study how such information spillovers impact the incentives that agents face when making their real economic decisions. On the positive front, we find that the sensitivity of equilibrium outcomes to noise and to higher-order uncertainty is amplified, exacerbating the disconnect from fundamentals. On the normative front, we find that these effects are symptoms of constrained inefficiency; we then investigate policies that can improve welfare in our model without any informational advantage on the government's part. At the heart of these results is a distortion that induces a conventional neoclassical economy to behave as a Keynesian "beauty contest" and to exhibit fluctuations that may look like "irrational exuberance" to an outside observer"--National Bureau of Economic Research web site.

Names

  • Angeletos, Marios
  • Lorenzoni, Guido
  • Pavan, Alessandro
  • National Bureau of Economic Research

Created / Published

  • Cambridge, MA : National Bureau of Economic Research, c2010.

Notes

  • -  Title from PDF file as viewed on 4/13/2010.
  • -  Includes bibliographical references.
  • -  Also available in print.
  • -  Mode of access: World Wide Web.
  • -  System requirements: Adobe Acrobat Reader.

Call Number/Physical Location

  • HB1

Digital Id

Library of Congress Control Number

  • 2010655828

Access Advisory

  • Unrestricted online access

Online Format

  • image
  • pdf

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Cite This Item

Citations are generated automatically from bibliographic data as a convenience, and may not be complete or accurate.

Chicago citation style:

Angeletos, Marios, Guido Lorenzoni, Alessandro Pavan, and National Bureau Of Economic Research. Beauty Contests and Irrational Exuberance a Neoclassical Approach. Cambridge, MA: National Bureau of Economic Research, 2010. Pdf. https://aj.sunback.homes/item/2010655828/.

APA citation style:

Angeletos, M., Lorenzoni, G., Pavan, A. & National Bureau Of Economic Research. (2010) Beauty Contests and Irrational Exuberance a Neoclassical Approach. Cambridge, MA: National Bureau of Economic Research. [Pdf] Retrieved from the Library of Congress, https://aj.sunback.homes/item/2010655828/.

MLA citation style:

Angeletos, Marios, et al. Beauty Contests and Irrational Exuberance a Neoclassical Approach. Cambridge, MA: National Bureau of Economic Research, 2010. Pdf. Retrieved from the Library of Congress, <aj.sunback.homes/item/2010655828/>.