Sentiments ∗

@inproceedings{Angeletos2010Sentiments,
  title={Sentiments ∗},
  author={G. Angeletos and Jennifer La'O},
  year={2010}
}
This paper develops a novel theory of fluctuations, one that seeks to capture the self-fulfilling nature of short-run phenomena within an otherwise canonical neoclassical framework. In our model, business-cycle fluctuations obtain without any innovation in technologies, preferences, and other fundamentals. To outside observers, these fluctuations may appear to be driven by random shifts in “market sentiment”, by arbitrary waves of “optimism” and “pessimism”, or by mystical forces known as… Expand

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