Abstract
This paper presents the concept of psychological point of equilibrium (PPE), which is a mental state achieved by average investors when trying to make decisions during market bubble's inflationary stages. The PPE results from an interplay between agents acting in a volatile market that is characterized by predatory behaviors. Prior to the 2008 subprime crisis, average investors are assumed to have displaced their logical PPEs in large part as a consequence of their attraction towards predatory mortgages and teaser rates. A better understanding of average investor's vulnerabilities may help governments to implement more efficient measures aimed at curving predatory behaviors.
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