Speculative investor behavior and learning

Stephen Morris

Research output: Contribution to journalArticlepeer-review

154 Scopus citations


As traders learn about the true distribution of some asset's dividends, a speculative premium occurs as each trader anticipates the possibility of reselling the asset to another trader before complete learning has occurred. Small differences in prior beliefs lead to large speculative premiums during the learning process. This phenomenon helps explain a paradox concerning the pricing of initial public offerings. The result casts light on the significance of the common prior assumption in economic models.

Original languageEnglish (US)
Pages (from-to)1111-1133
Number of pages23
JournalQuarterly Journal of Economics
Issue number4
StatePublished - Nov 1996

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


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