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"Speculative Investor Behavior and Learning''

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  • Stephen Morris

Abstract

As traders learn about the true distribution of some asset's dividends, a speculative premium occurs as each trader anticipates the possibility of reselling the asset to another trader before complete learning has occurred. Small differences in prior beliefs lead to large speculative premiums during the learning process. This phenomenon helps explain a paradox concerning the pricing of initial public offerings. The result casts light on the significance of the common prior assumption in economic models.
(This abstract was borrowed from another version of this item.)

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  • Stephen Morris, "undated". ""Speculative Investor Behavior and Learning''," CARESS Working Papres 95-13, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
    • Handle: RePEc:wop:pennca:95-13
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    File URL: http://www.ssc.upenn.edu/econ/CARESS/CARESSpdf/95-13.pdf
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    References listed on IDEAS

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    1. Lintner, John, 1969. "The Aggregation of Investor's Diverse Judgments and Preferences in Purely Competitive Security Markets," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 4(4), pages 347-400, December.
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