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Fragility of Financial Markets

Itay Goldstein et al.

Annual Review of Financial Economics2025https://doi.org/10.1146/annurev-financial-120522-114723article
AJG 3ABDC B
Weight
0.41

Abstract

Fragility of financial markets arises when market prices exhibit amplified reaction to underlying shocks, either fundamental or nonfundamental. The history of financial markets features many examples of such episodes, market-wide or asset-specific, which have generally been of great concern. Using a canonical framework of trading in financial markets, we provide an overview of forces generating fragility. These forces include learning by investors from the price as they make trading decisions and various channels for strategic complementarities among investors that act against price-induced strategic substitutes. We analyze the informativeness and volatility of prices and how they are related to the fragility concept.

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https://doi.org/https://doi.org/10.1146/annurev-financial-120522-114723

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@article{itay2025,
  title        = {{Fragility of Financial Markets}},
  author       = {Itay Goldstein et al.},
  journal      = {Annual Review of Financial Economics},
  year         = {2025},
  doi          = {https://doi.org/https://doi.org/10.1146/annurev-financial-120522-114723},
}

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Evidence weight

0.41

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.25 × 0.4 = 0.10
M · momentum0.55 × 0.15 = 0.08
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.