Abstract
I present closed-form solutions for prices, portfolios, and beliefs in a model where four types of investors trade assets over time: naive investors who learn via a social network, “fanatics” possibly spreading fake news, rational short-term investors, and
long-term investors. I show that fanatic and rational views dominate over time due to echo-chamber effects, and their relative importance depends on their following by influencers. Securities markets exhibit social network spillovers, large effects of influencers and thought leaders, bubbles, bursts of high volume, price momentum, fundamental momentum, and reversal. The model sheds new light on the GameStop event, historical bubbles, and asset markets more generally
long-term investors. I show that fanatic and rational views dominate over time due to echo-chamber effects, and their relative importance depends on their following by influencers. Securities markets exhibit social network spillovers, large effects of influencers and thought leaders, bubbles, bursts of high volume, price momentum, fundamental momentum, and reversal. The model sheds new light on the GameStop event, historical bubbles, and asset markets more generally
| Original language | English |
|---|---|
| Publication date | 2022 |
| Number of pages | 52 |
| Publication status | Published - 2022 |
| Event | ASSA 2022 Virtual Annual Meeting - , WWW Duration: 7 Jan 2022 → 9 Jan 2022 https://www.aeaweb.org/conference/2022 |
Conference
| Conference | ASSA 2022 Virtual Annual Meeting |
|---|---|
| Country/Territory | WWW |
| Period | 07/01/2022 → 09/01/2022 |
| Internet address |
Keywords
- Networks
- Influencers
- Social media
- Bubbles
- Asset prices
- Belief formation
- Momentum
- Reversal