Related papers: Market bubbles and crashes
Financial markets are subject to long periods of polarized behavior, such as bull-market or bear-market phases, in which the vast majority of market participants seem to almost exclusively choose one action (between buying or selling) over…
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…
The ultimate value of theories of the fundamental mechanisms comprising the asset price in financial systems will be reflected in the capacity of such theories to understand these systems. Although the models that explain the various states…
We introduce a mathematical criterion defining the bubbles or the crashes in financial market price fluctuations by considering exponential fitting of the given data. By applying this criterion we can automatically extract the periods in…
We introduce a new diffusion process Xt to describe asset prices within an economic bubble cycle. The main feature of the process, which differs from existing models, is the drift term where a mean-reversion is taken based on an exponential…
We consider a simple model of rational agents competing in a single product market described by simple linear demand curve. Contrary to accepted economic theory, the agents' production levels synchronise in the absence of conscious…
In retrospect, the experimental findings on competitive market behavior called for a revival of the old, classical, view of competition as a collective higgling and bargaining process (as opposed to price-taking behaviors) founded on…
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…
The Sornette-Ide differential equation of herding and rational trader behaviour together with very small random noise is shown to lead to crashes or bubbles where the price change goes to infinity after an unpredictable time. About 100 time…
We propose a non linear Langevin equation as a model for stock market fluctuations and crashes. This equation is based on an identification of the different processes influencing the demand and supply, and their mathematical transcription.…
As we show using the notion of equilibrium in the theory of infinite sequential games, bubbles and escalations are rational for economic and environmental agents, who believe in an infinite world. This goes against a vision of a self…
We show that a simple model of a spatially resolved evolving economic system, which has a steady state under simultaneous updating, shows stable oscillations in price when updated asynchronously. The oscillations arise from a gradual…
This article proposes a complementary theoretical framework in behavioural finance by interpreting financial markets during boom-and-bust episodes as a Le Bonian crowd. While behavioural finance has documented the limits of individual…
A microscopic model of financial markets is considered, consisting of many interacting agents (spins) with global coupling and discrete-time thermal bath dynamics, similar to random Ising systems. The interactions between agents change…
We investigate whether fractal markets hypothesis and its focus on liquidity and invest- ment horizons give reasonable predictions about dynamics of the financial markets during the turbulences such as the Global Financial Crisis of late…
I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect…
Can unstructured text data from social media help explain the drivers of large asset price fluctuations? This paper investigates how social forces affect asset prices, by using machine learning tools to extract beliefs and positions of…
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…
Renowned method of log-periodic power law(LPPL) is one of the few ways that a financial market crash could be predicted. Alongside with LPPL, this paper propose a novel method of stock market crash using white box model derived from simple…
We analyze how equilibrium housing prices are determined in the process of economic development within an overlapping generations model with perfect housing and rental markets. We characterize the rent growth rate in all equilibria. The…