Contagion As A Wealth Effect / Discussion  

Oleh:

Kyle, Albert S. ; Wei, Xiong ; Ross, Stephen A.

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Journal of Finance (EBSCO) vol. 56 no. 4 (2001), page 1401-1443.
Topik: WEALTH; studies; volatility; mathematical models; investment policy; securities trading
Fulltext: p 1401.pdf (2.02MB)

Ketersediaan

Perpustakaan Pusat (Semanggi) Nomor Panggil: JJ88 Non-tandon: 1 (dapat dipinjam: 0) Tandon: tidak ada

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Isi artikel

Financial contagion is described as a wealth effect in a continuous-time model with 2 risky assets and 3 types of traders. Noise traders trade randomly in one market. Long-term investors provide liquidity using a linear rule based on fundamentals. Convergence traders with logarithmic utility trade optimally in both markets. Asset price dynamics are endogenously determined as functions of endogenous wealth and exogenous noise. When convergence traders lose money, they liquidate positions in both markets. This creates contagion, in that returns become more volatile and more correlated. Contagion reduces benefits from portfolio diversification and raises issues for risk management.

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