http://www.bloombergview.com/articles/2016-03-24/inflating-asset-bubbles-spread-like-a-zombie-virus
What were [people] doing [in the 2000s housing bubble]? One possible
answer is herd behavior. Economists have studied herding in financial
markets, but their theories are generally unwieldy and their results --
until now -- have been inconclusive. Psychological effects, such as
greed, or FOMO -- fear of missing out -- are other possibilities. These
kinds of effects are regularly cited by financial market participants,
but are rarely used in academic finance theory.
... The lesson appears
clear: Bubbles exist. Investors aren't just rational, patient,
well-informed, emotionless calculators of risk and return. Now the job
is to figure out what really makes them tick.
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