Chicago Fed paper explores determinants of asset-price bubbles


A Chicago Federal Reserve paper published on Tuesday says risk-shifting models can give rise to both overvaluation and boom-bust patterns, and discusses the conditions under which booms and speculative trading can emerge.

Gadi Barlevy, the paper's authors, examine whether a model in which asset prices deviate from fundamentals can capture the key features of boom-bust episodes in asset markets. Barlevy says theoretical models of bubbles are based on the notion that the price of an asset can

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