Neues BERG Working Paper No. 177 von Roberto Dieci, Noemi Schmitt und Frank Westerhoff erschienen!

In der BERG Working Paper Series 177 wurde von Roberto Dieci, Noemi Schmitt und Frank Westerhoff ein neues Papier mit dem Titel "Boom-bust cycles and asset market participation waves: momentum, value, risk and herding" veröffentlicht.

Eine Gesamtübersicht aller bisher erschienenen BERG Working Paper finden Sie hier.



We develop an asset market participation model in which investors base their market entry decisions on the momentum, value and risk of the market. Despite our behavioral framework, the model’s fundamental steady state is characterized by standard present-value relations between expected future payouts and the model-implied risk-adjusted return. We derive conditions under which endogenous asset market participation waves and co-evolving boom-bust cycles emerge. Moreover, we show that the asset market may display spontaneous, sharp and permanent downturns if investors react sensitively to risk, an outcome that goes hand in hand with low asset market participation rates and excess volatility.