You are kindly invited to de Economics Department's seminar, where it will be presented the article called "Managing Overreaction During a Run".

Presents: Caio Machado, Associate Professor, PUC.

Abstract: I propose a global game model of runs with diagnostic investors and use it to study temporary suspensions intended to provide a time-out for agents to digest incoming information. Investors initially overreact to news and suspensions can mechanically prevent them from making decisions based on biased beliefs. I show that during bad times, when bad public news arrives and/or investment returns are low, such policy actually amplifies runs. During good times, the opposite result arises. A small amount of overreaction in beliefs about exogenous fundamentals can lead to large overreaction in beliefs about the action of others in equilibrium.

The event will be held in the 1605 classroom.

Kind regards,

Research Direction