Nonfundamental Speculation Revisited

Nonfundamental Speculation Revisited

  • LIYAN YANG
  • HAOXIANG ZHU

Article first published online: 28th August 2017 DOI: 10.1111/jofi.12548

Abstract


We show that a linear pure strategy equilibrium may not exist in the model of Madrigal (1996), contrary to the claim of the original paper. This is because Madrigal's characterization of a pure strategy equilibrium omits a second‐order condition. If the nonfundamental speculator's information about noise trading is sufficiently precise, a linear pure strategy equilibrium fails to exist. In parameter regions where a pure strategy equilibrium does exist, we identify a few calculation errors in Madrigal (1996) that result in misleading implications.

Sign in to access the full article.

Related articles


MISCELLANEA

Article first published online: 3rd January 2018 / DOI: 10.1111/jofi.12461

Read Article

ISSUE INFORMATION FM

Article first published online: 3rd January 2018 / DOI: 10.1111/jofi.12462

Read Article

ISSUE INFORMATION BM

Article first published online: 3rd January 2018 / DOI: 10.1111/jofi.12463

Read Article

ANNOUNCEMENTS

Article first published online: 3rd January 2018 / DOI: 10.1111/jofi.12594

Read Article

Preliminary Program AFA 2018 PHILADELPHIA MEETINGS SEVENTY EIGHTH ANNUAL MEETING AMERICAN FINANCE ASSOCIATION Philadelphia, Pennsylvania

Article first published online: 3rd January 2018 / DOI: 10.1111/jofi.12595

Read Article

Participant Schedule Report Participants in the AFA 2018 Philadelphia Meetings January 5–7, 2018

Article first published online: 3rd January 2018 / DOI: 10.1111/jofi.12596

Read Article

Are you an Author?


Please read our submission requirements and find out how to submit your paper to the Journal of Finance

Submit a paper