Unformatted text preview: nomic theory? 3. Explain what is meant by “noise trading”. How can the presence of noise traders account for highly volatile stock prices? 4. What is an asset price bubble? Provide some illustrations of historical episodes that might be interpreted as bubbles. How can asset price bubbles be explained? 5. Explain what is meant by a “Ponzi scheme”. Describe the circumstances necessary for a successful Ponzi scheme (i.e., one that does not collapse in ﬁnite time). *****...
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- Spring '11
- Opportunity Cost, Ponzi scheme, Economic bubble