Partial Equilibrium Thinking, Extrapolation, and Bubbles

• 成果类型: Article; Early Access
• 署名作者: Bastianello, Francesca; Fontanier, Paul
• 署名单位: University of Chicago; Yale University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454; 1465-7368
• DOI: 10.1093/rfs/hhag053
• 发表日期: 2026-06-18
• 关键词: D84; G12; G41; institutional investors; price; expectations; INFORMATION; BEHAVIOR; models; EFFICIENCY; returns; booms; RISK

摘要

We develop a dynamic theory of Partial Equilibrium Thinking (PET), which micro-founds time-varying return extrapolation: extrapolative beliefs are present at all times, but only sometimes manifest themselves in explosive ways. We formalize the distinction between normal times shocks and displacement shocks, and study their interaction with extrapolative beliefs. In normal times, PET generates constant extrapolation and momentum. After a displacement shock that increases uncertainty, PET leads to stronger and time-varying extrapolation, triggering bubbles and endogenous crashes. Our theory sheds light on both market dynamics in normal times and Kindleberger's narrative of bubbles within a unified framework.