Positive Feedback Investment Strategies and Destabilizing Rational Speculation

  title={Positive Feedback Investment Strategies and Destabilizing Rational Speculation},
  author={J. DeLong and A. Shleifer and L. Summers and R. Waldmann},
  • J. DeLong, A. Shleifer, +1 author R. Waldmann
  • Published 1989
  • Economics
  • Analyses of the role of rational speculators in financial markets usually presume that such investors dampen price fluctuations by trading against liquidity or noise traders. This conclusion does not necessarily hold when noise traders follow positive-feedback investment strategies buy when prices rise and sell when prices fall. In such cases, it may pay rational speculators to try to jump on the bandwagon early and to purchase ahead of noise trader demand. If rational speculators' attempts to… CONTINUE READING
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