In Search of the Origins of Financial Fluctuations: The Inelastic Markets Hypothesis
124 Pages Posted: 14 Jul 2021
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In Search of the Origins of Financial Fluctuations: The Inelastic Markets Hypothesis
In Search of the Origins of Financial Fluctuations: The Inelastic Markets Hypothesis
Date Written: June 2021
Abstract
Our framework allows us to give a dynamic economic structure to old and recent datasets comprising holdings and flows in various segments of the market. The mystery of apparently random movements of the stock market, hard to link to fundamentals, is replaced by the more manageable problem of understanding the determinants of flows in inelastic markets. We delineate a research agenda that can explore a number of questions raised by this analysis, and might lead to a more concrete understanding of the origins of financial fluctuations across markets.
JEL Classification: E7, G1, G10, G32, G4
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