Access Restriction

Author Wright, Christopher ♦ Eves, Chris ♦ Jefferies, Rodney
Source CiteSeerX
Content type Text
File Format PDF
Subject Domain (in DDC) Computer science, information & general works ♦ Data processing & computer science
Subject Keyword Price Bubble Bust ♦ Sound Investment Strategy ♦ Price Index ♦ Deductive Theoretical Enquiry ♦ Pricing Model ♦ Past Price Gain ♦ Long-run Market-worth ♦ Market Behaviour ♦ Price Bubble ♦ Capital Gain Expectation ♦ Analytical Approach ♦ Past Price-based Valuation Model ♦ Numeric Example ♦ Rational Expectation ♦ Lagged Effect ♦ Market Price ♦ Destabilising Influence ♦ Dynamic Market Solution
Abstract This paper is a deductive theoretical enquiry into the flow of effects from the geometry of price bubbles/busts, to price indices, to pricing behaviours of sellers and buyers, and back to price bubbles/busts. The intent of the analysis is to suggest analytical approaches to identify the presence, maturity, and/or sustainability of a price bubble. We present a pricing model to emulate market behaviour, including numeric examples and charts of the interaction of supply and demand. The model extends into dynamic market solutions myopic (single- and multi-period) backward looking rational expectations to demonstrate how buyers and sellers interact to affect supply and demand and to show how capital gain expectations can be a destabilising influence – i.e. the lagged effects of past price gains can drive the market price away from long-run market-worth. Investing based on the outputs of past price-based valuation models appear to be more of a game-of-chance than a sound investment strategy.
Educational Role Student ♦ Teacher
Age Range above 22 year
Educational Use Research
Education Level UG and PG ♦ Career/Technical Study
Learning Resource Type Article