Multi-Asset Bubbles Equilibrium Price Dynamics
Abstract
The price-bubble and crash process formation is theoretically investigated in a two-asset equilibrium model. Sufficient and necessary conditions are derived for the existence of average equilibrium price dynamics of different agent-based models, where agents are distinguished in terms of factor and investment trading strategies. In line with experimental results, we show that assets with a positive average dividend, i.e., with a strictly declining fundamental value, display at the equilibrium price the typical hump-shaped bubble observed in experimental asset markets. Moreover, a misvaluation effect is observed in the asset with a constant fundamental value, triggered by the other asset that displays the price bubble shape when a sharp price decline is exhibited at the end of the market.
Keywords
Cite
@article{arxiv.2206.01468,
title = {Multi-Asset Bubbles Equilibrium Price Dynamics},
author = {Francesco Cordoni},
journal= {arXiv preprint arXiv:2206.01468},
year = {2024}
}