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We propose that a tree-like hierarchical structure represents a simple and effective way to model the emergent behaviour of financial markets, especially markets where there exists a pronounced intersection between social media influences…
The aim of this paper is to propose a heterogeneous agent model of stock markets that develop complicated endogenous price fluctuations. We find occurrences of non-stationary chaos, or speculative bubble, are caused by the heterogeneity of…
We study how AI agents form expectations and trade in experimental asset markets. Using a simulated open-call auction populated by autonomous Large Language Model (LLM) agents, we document three main findings. First, AI agents exhibit…
Keeping a basic tenet of economic theory, rational expectations, we model the nonlinear positive feedback between agents in the stock market as an interplay between nonlinearity and multiplicative noise. The derived hyperbolic stochastic…
Oft-cited causes of mini-flash crashes include human errors, endogenous feedback loops, the nature of modern liquidity provision, fundamental value shocks, and market fragmentation. We develop a mathematical model which captures aspects of…
Large variations in stock prices happen with sufficient frequency to raise doubts about existing models, which all fail to account for non-Gaussian statistics. We construct simple models of a stock market, and argue that the large…
We are looking for the agent-based treatment of the financial markets considering necessity to build bridges between microscopic, agent based, and macroscopic, phenomenological modeling. The acknowledgment that agent-based modeling…
Urban housing markets, along with markets of other assets, universally exhibit periods of strong price increases followed by sharp corrections. The mechanisms generating such non-linearities are not yet well understood. We develop an…
A characteristic feature of complex systems in general is a tight coupling between their constituent parts. In complex socio-economic systems this kind of behavior leads to self-organization, which may be both desirable (e.g. social…
In this paper we study the evolution of asset price bubbles driven by contagion effects spreading among investors via a random matching mechanism in a discrete-time version of the liquidity based model of [25]. To this scope, we extend the…
In social networks, bursts of activity often result from the imitative behavior between interacting agents. The Ising model, along with its variants in the social sciences, serves as a foundational framework to explain these phenomena…
This paper develops a dynamic equilibrium model where agents exhibit a strong form of belief heterogeneity: they disagree about zero probability events. It is shown that, somewhat surprisingly, equilibrium exists in this setting, and that…
Agent-based models help explain stock price dynamics as emergent phenomena driven by interacting investors. In this modeling tradition, investor behavior has typically been captured by two distinct mechanisms -- learning and heterogeneous…
We study a dynamical Ising model of agents' opinions (buy or sell) with coupling coefficients reassessed continuously in time according to how past external news (magnetic field) have explained realized market returns. By combining herding,…
We present a macro-finance model with innovation and knowledge spillover. Skilled agents engage in R&D activities (establish firms) or work in the knowledge-intensive sector. Unskilled agents work in the traditional sector. Knowledge…
In speculative markets, risk-free profit opportunities are eliminated by traders exploiting them. Markets are therefore often described as "informationally efficient", rapidly removing predictable price changes, and leaving only residual…
Phenomena which involves collective choice of many agents who are interacting with each other and choosing one of several alternatives, based on the limited information available to them, frequently show switching between two distinct…
We introduce a minimal Agent Based Model for financial markets to understand the nature and Self-Organization of the Stylized Facts. The model is minimal in the sense that we try to identify the essential ingredients to reproduce the main…
Establishing unambiguously the existence of speculative bubbles is an on-going controversy complicated by the need of defining a model of fundamental prices. Here, we present a novel empirical method which bypasses all the difficulties of…
A general theory of innovation and progress in human society is outlined, based on the combat between two opposite forces (conservatism/inertia and speculative herding "bubble" behavior). We contend that human affairs are characterized by…