Liquidity sentiments
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- dc.contributor.author Asriyan, Vladimir
- dc.contributor.author Fuchs, William
- dc.contributor.author Green, Brett
- dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
- dc.date.accessioned 2020-05-25T09:27:04Z
- dc.date.available 2020-05-25T09:27:04Z
- dc.date.issued 2017-10-09
- dc.date.modified 2020-05-25T09:25:22Z
- dc.description.abstract We develop a rational theory of liquidity sentiments in which the market outcome in any given period depends on agents' expectations about market conditions in future periods. Our theory is based on the interaction between adverse selection and resale considerations giving rise to an intertemporal coordination problem that yields multiple self-fulfilling equilibria. We construct "sentiment" equilibria in which sunspots generate fl uctuations in prices, volume, and welfare, all of which are positively correlated. The intertemporal nature of the coordination problem disciplines the set of possible sentiment dynamics. In particular, sentiments must be sufficiently persistent and transitions must be stochastic. We consider an extension with production in which asset quality is endogenously determined and provide conditions under which sentiments are a necessary feature of any equilibrium. A testable implication of the model is that assets produced in good times are of lower average quality than those produced in bad times. We discuss the predictions of our theory within the context of several applications.
- dc.format.mimetype application/pdf*
- dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1583
- dc.identifier.citation
- dc.identifier.uri http://hdl.handle.net/10230/33894
- dc.language.iso eng
- dc.relation.ispartofseries Economics and Business Working Papers Series; 1583
- dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
- dc.rights.accessRights info:eu-repo/semantics/openAccess
- dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
- dc.subject.keyword sentiment
- dc.subject.keyword adverse selection
- dc.subject.keyword liquidity
- dc.subject.keyword capital reallocation
- dc.subject.keyword bubbles
- dc.subject.keyword Macroeconomics and International Economics
- dc.title Liquidity sentiments
- dc.title.alternative
- dc.type info:eu-repo/semantics/workingPaper