Informational overshooting, booms, and crashes

This paper offers an informational explanation to stock markets' booms and crashes. This explanation builds on the idea of `informational overshooting': if market fundamentals change for an unknown period of time, prices experience a boom, which ends in a crash, due to informational dynamics. The paper then shows that `informational overshooting' occurs when the market expands to a new capacity, which is unknown until it is reached. The paper...