Corpus ID: 15716771

Business as Usual, Market Crashes, and Wisdom after the Fact

@article{Caplin1994BusinessAU,
  title={Business as Usual, Market Crashes, and Wisdom after the Fact},
  author={Andrew Caplin and John Leahy},
  journal={The American Economic Review},
  year={1994},
  volume={84},
  pages={548-565}
}
The authors present a three-stage model of market dynamics. In the first stage, routine behavior tends to keep information of common interest trapped in private hands. In the second stage, private information reaches a threshold that triggers some agents to alter their behavior; these actions release information to the market. The final stage involves the market's response to this news as other participants react to the initial departure from routine behavior. The authors present an application… Expand
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