Sunspot

Sunspot

In economics, sunspots are extrinsic random variables upon which participants coordinate their decisions. Extrinsic random variables do not affect economic fundamentals directly, but may have an effect on equilibrium outcomes because they influence expectations. In a proper sunspot equilibrium, the allocation of resources depends on sunspots to a significant extent.

Sunspot models are rational-expectations and general-equilibrium models that explain excess volatility in a system.

Uncertainty about economic fundamentals, known as intrinsic uncertainty, is not the only source of volatility in economic outcomes. Market uncertainty can also be driven by extrinsic uncertainty, which includes such variables as market psychology, self-fulfilling prophecies and "animal spirits", collectively known as sunspots.

The concept of sunspot equilibrium was introduced by David Cass and Karl Shell in 1983, with the term 'sunspot' being something of a spoof on the work of the 19th-century economist Jevons, who related the business cycle to the cycle of actual sunspots. Shell notes that the best way to analyze bank runs and related financial-system weaknesses is as a sunspot-equilibrium outcome. The 2008 financial meltdown can be viewed as partly sunspot driven.


Investment dictionary. . 2012.

Игры ⚽ Нужна курсовая?

Look at other dictionaries:

  • sunspot — 1868, in astronomy, from SUN (Cf. sun) + SPOT (Cf. spot). Earlier “a spot on the skin caused by exposure to the sun” (1818) …   Etymology dictionary

  • sunspot — ► NOUN Astronomy ▪ a temporary darker and cooler patch on the sun s surface, associated with the sun s magnetic field …   English terms dictionary

  • sunspot — [sun′spät΄] n. any of the temporarily cooler regions appearing cyclically as dark spots on the surface of the sun, accompanied by increased geomagnetic disturbances …   English World dictionary

  • Sunspot — A sunspot is a region on the Sun s surface (photosphere) that is marked by intense magnetic activity, which inhibits convection, forming areas of reduced surface temperature. They can be visible from Earth without the aid of a telescope. Although …   Wikipedia

  • sunspot — sunspotted, adj. sunspottedness, n. /sun spot /, n. one of the relatively dark patches that appear periodically on the surface of the sun and affect terrestrial magnetism and certain other terrestrial phenomena. [1805 15; SUN + SPOT] * * * Cooler …   Universalium

  • sunspot — UK [ˈsʌnˌspɒt] / US [ˈsʌnˌspɑt] noun [countable] Word forms sunspot : singular sunspot plural sunspots 1) science a dark area on the surface of the sun 2) a very sunny place that is popular for holidays …   English dictionary

  • sunspot — /ˈsʌnspɒt / (say sunspot) noun 1. one of the relatively dark patches which appear periodically on the surface of the sun, and which have a certain effect on terrestrial magnetism and other terrestrial phenomena. Their appearance is spasmodic but… …  

  • Sunspot — Tache solaire Taches solaires Une tache solaire (anglais : sunspot) est une région sur la surface du Soleil (photosphère) qui est marquée par une température inférieure à son environnement et a une intense activité magnétique, qui inhibe la …   Wikipédia en Français

  • sunspot — Saulės dėmė statusas T sritis fizika atitikmenys: angl. sunspot vok. Sonnenfleck, m rus. солнечное пятно, n pranc. tache solaire, f …   Fizikos terminų žodynas

  • sunspot maximum — sunspot maximum, the period during the sunspot cycle in which sunspots are most frequent …   Useful english dictionary

Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”