Financial leverage and market volatility with diverse beliefs

DOI10.1007/S00199-010-0548-8zbMATH Open1214.91065OpenAlexW2089971568MaRDI QIDQ540414FDOQ540414

Authors: Wen-Chung Guo, Frank Yong Wang, Ho-Mou Wu 

Publication date: 3 June 2011

Published in: Economic Theory (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1007/s00199-010-0548-8

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zbMATH Keywords

leverage effectdiverse beliefsfinancial leveragepyramiding/depyramiding effectstock price volatility

Mathematics Subject Classification ID

General equilibrium theory (91B50)

Cites Work

• Markets with a Continuum of Traders
• Existence of Competitive Equilibria in Markets with a Continuum of Traders
• On the structure and diversity of rational beliefs
• Speculative Investor Behavior in a Stock Market with Heterogeneous Expectations
• Diverse beliefs and time variability of risk premia
• Speculative trading with rational beliefs and endogenous uncertainty
• Asset price volatility and trading volume with rational beliefs
• Endogenous uncertainty in a general equilibrium model with price contingent contracts
• Competitive Speculation
• Speculative Investor Behavior and Learning

Cited In (17)

• Impacts of leveraged trading and liquidity commonality on decline of stock price
• The impact of financial leverage on risk of equity measured by loss-oriented risk measures: an option pricing approach
• Leverage effect breakdowns and flight from risky assets
• Margin borrowing, stock returns, and market volatility: evidence from margin credit balance
• Signal on the Margin: Behavior of Levered Investors and Future Economic Conditions*
• Why does bad news increase volatility and decrease leverage?
• The effects of dependent beliefs on endogenous leverage
• Why can margin requirements increase volatility and benefit margin constrained investors?
• Business cycle amplification with heterogeneous expectations
• Monetary policy and heterogeneous expectations
• The diversity of forecasts from macroeconomic models of the US economy
• Effects of financial innovations on market volatility when beliefs are heterogeneous
• Expectational coordination in simple economic contexts. Concepts and analysis with emphasis on strategic substituabilities
• Leverage causes fat tails and clustered volatility
• The role of the leverage effect in the price discovery process of credit markets
• Diverse beliefs and time variability of risk premia
• Welfare effects of short-sale constraints under heterogeneous beliefs

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