Behavioral Aspects of Arbitrageurs in Timing Games of Bubbles and Crashes

Hitoshi Matsushima

No CARF-F-144, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo

Abstract: We model a timing game of bubbles and crashes a la Abreu and Brunnermeier (2003), in which arbitrageurs compete with each other to beat the gun in a stock market. However, unlike Abreu and Brunnermeier, instead of assuming sequential awareness,the present paper assumes that with a small probability, each arbitrageur is behavioral and committed to ride the bubble at all times. We show that with incomplete information, even rational arbitrageurs are willing to ride the bubble. In particular, the bubble can persist for a long period as the unique Nash equilibrium outcome.

Pages: 39 pages
Date: 2009-01
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Behavioral aspects of arbitrageurs in timing games of bubbles and crashes (2013)
Working Paper: Behavioral Aspects of Arbitrageurs in Timing Games of Bubbles and Crashes (2012)
Working Paper: Behavioral Aspects of Arbitrageurs in Timing Games of Bubbles and Crashes (2012)
Working Paper: Behavioral Aspects of Arbitrageurs in Timing Games of Bubbles and Crashes (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:cfi:fseres:cf144

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