Price Destabilizing Speculation

Abstract

It is sometimes asserted that rational speculative activity must result in more stable prices because speculators buy when prices are low and sell when they are high. This is incorrect. Speculators buy when the chances of price appreciation are high, selling when the chances are low. Speculative activity in an economy in which all agents are rational, have identical priors, and have access to identical information may destabilize prices, under any reasonable definition of destabilization. It takes extremely strong conditions to ensure that speculative activity (of the commodity storage variety) "stabilizes" price, even in a very weak sense.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 239 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.