Psychological Aspects of Market Crashes

Leoni, Dr Patrick (2007) Psychological Aspects of Market Crashes. UNSPECIFIED. (Unpublished)

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This paper analyzes the sensitivity of market crashes to investors' psychology in a standard general equilibrium framework. Contrary to the traditional view that market crashes are driven by large drops in aggregate endowments. We argue from a theoretical standpoint that individual anticipations of such drops are necessary condition for crashes to occur and that the magnitude of such crashes are positively correlated with the level of individual anticipations of drops.

Item Type: Other
Academic Unit: Faculty of Social Sciences > Economics, Finance and Accounting
Item ID: 493
Depositing User: Ms Sandra Doherty
Date Deposited: 18 Apr 2007
Refereed: No

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