Trading with Information Cascades and Partition Learning

DELBIANCO, FERNANDO; FIORITI, ANDRÉS; TOHMÉ, FERNANDO

Congreso; JOLATE; 2019

UNS

We present here a very simple model of the generation of speculative bubbles, based onthe asymmetry of information among agents. Those that are more informed are able to varythe price of assets by buying or selling them. Less informed agents are only able to observethe market price and can form mistaken expectations that lead to further price increases.In the end, more informed agents are able to profit from inducing the latter behavior in lessinformed investors.The results we obtain are highly dependent on the parameters of the model. But it canbe shown that instances exists in which a bubble forms in way that is usually identified inreal-world cases.