Behavioral Aspects of Arbitrageurs in Timing Games of Bubbles and Crashes

Hitoshi Matsushima

No CARF-F-285, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo

Abstract: This paper demonstrates the theoretical foundation that underlies the willingness of rational arbitrageurs to delay and reinforce the speculative attack. The key assumptions are that there is a small probability that arbitrageurs are behavioral and never time the market of their own accord and it is uncertain whether arbitrageurs are behavioral or rational. We model a stock market as a timing game, in which arbitrageurs compete to react quickest. We show that rational arbitrageurs are willing to ride the bubble for a long period. We also characterize symmetric Nash equilibria and show the sufficient condition for uniqueness

Pages: 32 pages
Date: 2012-08
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Citations: View citations in EconPapers (4)

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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 (2009)
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:cf285

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