Speaker : Jose A. Scheinkman (Princeton University)
Date : December 17, 2012 (Monday)
Venue : Lecture Theatre, William M. W. Mong Engineering Building, The Chinese University of Hong Kong [Map]
Lecture : 16:00-17:00
Drinks Reception: 17:00-18:00
Inquiry : hkqf_help@[NO-SPAM]se.cuhk.edu.hk
ABSTRACT: In this lecture I will exploit a model of asset prices where speculators overconfidence is a source of heterogeneous beliefs and arbitrage is limited. In the model, asset buyers are the most optimistic investors, but prices exceed even their optimistic valuation because the owner of an asset has the option of reselling it in the future to a more optimistic buyer. The value of this resale option can be identified as a bubble . I will focus on assets with a fixed terminal date, as is often the case with credit instruments. I will show that the size of a bubble satisfies a Partial Differential Equation that is similar to the equation satisfied by an American option but with a non-local free boundary, and use the PDE to evaluate the impact of parameters such as interest rates or a “Tobin tax” on the size of the bubble and on trading volume.
BIOGRAPHY: José A. Scheinkman is Theodore A. Wells ‘29 Professor of
Economics at Princeton University. Previously, Scheinkman was Alvin H.
Baum Distinguished Service Professor and Chairman of the Department of
Economics at the University of Chicago, Blaise Pascal Research Professor
(France) and Vice-President in Financial Strategies at Goldman Sachs.
He is a founding partner of Axiom Investment Advisors, LLC and a member
of the Board of Directors of Cosan Limited. Scheinkman’s research has
focused in building models that shed light on a variety of economic
phenomena such as economic fluctuations, the nature of oligopolistic
competition, the growth of cities, informal
economic activity, the spatial distribution of crime, the dynamics of
asset prices and bubbles in financial markets. He is a Member of the
National Academy of Sciences (USA), a Fellow of the American Academy of
Arts and Sciences, a “docteur honoris causa” from Université
Paris-Dauphine and a John Simon Guggenheim Memorial Fellow.
