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Speculative Dynamics

Author

Listed:
  • David M. Cutler
  • James M. Poterba
  • Lawrence H. Summers

Abstract

This paper presents evidence on the characteristic speculative dynamics of returns on stocks, bond, foreign exchange, real estate, collectibles, and precious metals. It highlights four stylized facts. First, returns tend to be positively serially correlated at high frequency. Second, they are weakly negatively serially correlated over long horizons. Third, deviations of asset values from proxies for fundamental value have predictive power for returns. Fourth, short term interest rates are negatively correlated with excess returns on other assets. The similarity of the results across markets suggests that they may be due to inherent features of the speculative process.

Suggested Citation

  • David M. Cutler & James M. Poterba & Lawrence H. Summers, 1991. "Speculative Dynamics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(3), pages 529-546.
    • Handle: RePEc:oup:restud:v:58:y:1991:i:3:p:529-546.
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    References listed on IDEAS

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