IDEAS home Printed from https://ideas.repec.org/a/jns/jbstat/v244y2024i4p351-379n1006.html
   My bibliography  Save this article

Fake News and Asset Price Dynamics

Author

Listed:
  • Mignot Sarah

    (Department of Economics, University of Bamberg, Feldkirchenstraße 21, 96045 Bamberg, Germany)

  • Pellizzari Paolo

    (Department of Economics, Ca’ Foscari University of Venice, Venezia, Italy)

  • Westerhoff Frank

    (Department of Economics, University of Bamberg, Feldkirchenstraße 21, 96045 Bamberg, Germany)

Abstract

We explore the impact of fake news on asset price dynamics within the asset-pricing model of Brock and Hommes (Brock, W. A., and C. H. Hommes. 1998. “Heterogeneous Beliefs and Routes to Chaos in a Simple Asset Pricing Model.” Journal of Economic Dynamics and Control 22 (8): 1235–74). By polluting the information landscape, fake news interferes with agents’ perception of the dividend process of the risky asset. Our analysis reveals that fake news decreases the steady-state price of the risky asset by making it even more risky. Moreover, fake news increases the market share of agents who use the destabilizing technical trading rule by rendering fundamental trading more difficult and costly. Instead of converging toward its steady state, the risky asset’s price may thus be subject to wild fluctuations. As it turns out, these fluctuations are concentrated below the risky asset’s steady-state price. We also show that fake news campaigns may allow certain agents to realize fraudulent profits.

Suggested Citation

  • Mignot Sarah & Pellizzari Paolo & Westerhoff Frank, 2024. "Fake News and Asset Price Dynamics," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 244(4), pages 351-379.
    • Handle: RePEc:jns:jbstat:v:244:y:2024:i:4:p:351-379:n:1006
    DOI: 10.1515/jbnst-2024-0019
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/jbnst-2024-0019
    Download Restriction: no
    File URL: https://libkey.io/10.1515/jbnst-2024-0019?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Keywords

    asset price dynamics; fake news; chartists and fundamentalists; bounded rationality and learning; stability and bifurcation analysis;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G41 - Financial Economics - - Behavioral Finance - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making in Financial Markets

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:jns:jbstat:v:244:y:2024:i:4:p:351-379:n:1006. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.