Animal Spirits and Risk in Financial Markets
Animal Spirits and Risk in Financial Markets
Author(s): Jukka IlomäkiSubject(s): Social Sciences, Financial Markets
Published by: Wydawnictwo Naukowe Wydziału Zarządzania Uniwersytetu Warszawskiego
Keywords: Risk; Portfolio Choice; Asset Pricing
Summary/Abstract: Keynes argues that a beauty contest in financial markets is a combination of rational higher-order beliefs and market psychology or animal spirits. We find that a stable equilibrium, where also market psychology is included, can be possible if uninformed investors agree to reduce their required rate of return indicating that they enlarge the risk of their investment with the animal spirits component.
Journal: Journal of Banking and Financial Economics
- Issue Year: 9/2018
- Issue No: 1
- Page Range: 52-59
- Page Count: 8
- Language: English