Coordinated investing with feedback and learning
- Publication Type:
- Journal Article
- Journal of Economic Behavior and Organization, 2008, 65 (2), pp. 202 - 223
- Issue Date:
This paper introduces assets for which the intrinsic value is endogenous to the amount of funding attracted. A rational expectations equilibrium is developed. Additionally, simulations of the model based on bounded rationality explore the different market behavior under fundamental and momentum based investing strategies. Both strategies produce herding characteristics. The herding under the fundamental strategy approximates the optimal investing of a rational central planner. The momentum strategy results in suboptimal economic development. © 2006 Elsevier B.V. All rights reserved.
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