New study reveals how speculative bubbles can persist in asset markets
The article explores how speculative bubbles can persist in asset markets due to differing beliefs about future dividends. By using a dynamic model with risk-neutral agents and short selling constraints, the study shows that disagreements among agents can lead to these bubbles. The research suggests that in complex learning environments, bubbles can last longer as learning may not always remove disagreements. The complexity of the environment plays a crucial role in the persistence of speculative bubbles.