Contagion of self-fulfilling financial crises due to diversification of investment portfolios

• 成果类型: Article; Proceedings Paper
• 署名作者: Goldstein, I; Pauzner, A
• 署名单位: Duke University; Tel Aviv University
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2004.03.004
• 发表日期: 2004
• 页码: 151-183
• 关键词: Financial crises; contagion; global games; diversification; GLOBALIZATION; Coordination failures; capital controls; Wealth effect; Strategic risk

摘要

We look at two countries that have independent fundamentals, but share the same group of investors. Each country might face a self-fulfilling crisis: Agents withdrawing their investments fearing that others will. A crisis in one country reduces agents' wealth. This makes them more averse to the strategic risk associated with the unknown behavior of other agents in the second country, increasing their incentive to withdraw their investments. Consequently, the probability of a crisis there increases. This generates a positive correlation between the returns in the two countries. Since diversification affects returns in our model, its welfare implications are non-trivial. (C) 2004 Elsevier Inc. All rights reserved.