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November 30, 2010 | History

Beauty contests and irrational exuberance 1 edition

Beauty contests and irrational exuberance
Marios Angeletos

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Beauty contests and irrational exuberance
a neoclassical approach
George-Marios Angeletos, Guido Lorenzoni, Alessandro Pavan

Published 2010 by National Bureau of Economic Research in Cambridge, MA .
Written in English.

About the Book

"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.

Edition Notes

Title from PDF file as viewed on 4/13/2010.

Includes bibliographical references.

Also available in print.

System requirements: Adobe Acrobat Reader.

Mode of access: World Wide Web.

Series
NBER working paper series -- working paper 15883, Working paper series (National Bureau of Economic Research : Online) -- working paper no. 15883.

Classifications

Library of Congress
HB1

The Physical Object

Format
Electronic resource

ID Numbers

Open Library
OL24472922M
LC Control Number
2010655828

History Created November 30, 2010 · 1 revision
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November 30, 2010 Created by ImportBot initial import