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• Article | Review of Financial Studies | September 2018

  Asset Price Dynamics in Partially Segmented Markets

  Robin Greenwood, Samuel G. Hanson and Gordon Y. Liao

  We develop a model in which capital moves quickly within an asset class but slowly between asset classes. While most investors specialize in a single asset class, a handful of generalists can gradually reallocate capital across markets. Upon the arrival of a large supply shock, prices of risk in the directly impacted asset class become disconnected from those in others. Over the long run, capital flows between markets and prices of risk become more closely aligned. While prices in the directly impacted market initially overreact to the supply shock, we show that prices in related asset classes underreact under plausible conditions. We use the model to assess event-study evidence on the impact of recent large-scale asset purchases by central banks.

  Keywords: System Shocks; Asset Pricing;

  Citation:

  Greenwood, Robin, Samuel G. Hanson, and Gordon Y. Liao. "Asset Price Dynamics in Partially Segmented Markets." Review of Financial Studies 31, no. 9 (September 2018): 3307–3343. (Internet Appendix Here.)  View Details

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• Article | Journal of Financial Economics | August 2018

  Extrapolation and Bubbles

  Nicholas Barberis, Robin Greenwood, Lawrence Jin and Andrei Shleifer

  We present an extrapolative model of bubbles. In the model, many investors form their demand for a risky asset by weighing two signals: an average of the asset’s past price changes and the asset’s degree of overvaluation. The two signals are in conflict, and investors “waver” over time in the relative weight they put on them. The model predicts that good news about fundamentals can trigger large price bubbles. We analyze the patterns of cash-flow news that generate the largest bubbles, the reasons why bubbles collapse, and the frequency with which they occur. The model also predicts that bubbles will be accompanied by high trading volume and that volume increases with past asset returns. We present empirical evidence that bears on some of the model’s distinctive predictions.

  Keywords: bubble; extrapolation; volume; Price Bubble; Mathematical Methods;

  Citation:

  Barberis, Nicholas, Robin Greenwood, Lawrence Jin, and Andrei Shleifer. "Extrapolation and Bubbles." Journal of Financial Economics 129, no. 2 (August 2018): 203–227.  View Details

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• Case | HBS Case Collection | January 2013 (Revised June 2018)

  Amazon, Apple, Facebook, and Google 2018

  John Deighton and Leora Kornfeld

  Four businesses had, by 2012, grown to dominate the infrastructure that all firms rely on to reach online customers. Will the balance of power among the four persist, will one take command at the expense of the other three, or are all four more vulnerable than they seem to outside forces? What are the implications for the pace at which consumers go online? Amara's Law claims that we tend to overestimate change in the short run, and underestimate it in the long run.

  Keywords: Online Technology; Internet; Competitive Advantage; Infrastructure; Mobile Technology; Growth and Development; Service Industry; Retail Industry; United States;

  Citation:

  Deighton, John, and Leora Kornfeld. "Amazon, Apple, Facebook, and Google 2018." Harvard Business School Case 513-060, January 2013. (Revised June 2018.) (request a courtesy copy.)  View Details

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