Market Liquidity, Hedging, and Crashes
建立理性预期模型，解释1987年股灾中少量卖盘如何引发价格暴跌，发现市场流动性远低于传统模型，少量对冲即可导致崩盘，并提出了降低波动性的方法。
In the absence of significant news, hedging strategies were blamed for the stock market crash of October 1987; but traditional models cannot explain how a relatively small amount of selling could cause so large a price drop. The authors develop a rational expectations model in which prices play an important role in shaping expectations; markets are much less liquid in their model than in traditional models. Discontinuities (or "crashes") can occur even with relatively little hedging. The model is consistent with theories as disparate as Keynes' "beauty contest" insights and Thom's "catastrophe" analysis and suggests means to reduce volatility. Copyright 1990 by American Economic Association.