Related papers: A Consistent Model of `Explosive' Financial Bubble…
Using the descriptive method of log-periodic power laws (LPPL) based on a theory of behavioral herding, we use a battery of parametric and non-parametric tests to demonstrate the existence of an antibubble in the yields with maturities…
Identifying unambiguously the presence of a bubble in an asset price remains an unsolved problem in standard econometric and financial economic approaches. A large part of the problem is that the fundamental value of an asset is, in…
We present a general methodology to incorporate fundamental economic factors to our previous theory of herding to describe bubbles and antibubbles. We start from the strong form of Rational Expectation and derive the general method to…
Empirical diagnosis of stability has received considerable attention, mostly focused on variance metrics for early warning signals of abrupt system change. Despite this, the theoretical foundation and application has been limited to…
Based on a continuous-time stochastic volatility model with a linear drift, we develop a test for explosive behavior in financial asset prices at a low frequency when prices are sampled at a higher frequency. The test exploits the…
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…
The recent surge in valuations among AI related firms has renewed concerns that markets may be entering a new phase of speculative exuberance, especially in the technology and semiconductor sectors at the center of the AI investment wave.…
This paper aims to provide a simple modelling of speculative bubbles and derive some quantitative properties of its dynamical evolution. Starting from a description of individual speculative behaviours, we build and study a second order…
Leverage is strongly related to liquidity in a market and lack of liquidity is considered a cause and/or consequence of the recent financial crisis. A repurchase agreement is a financial instrument where a security is sold simultaneously…
We introduce a model of super-exponential financial bubbles with two assets (risky and risk-free), in which rational investors and noise traders co-exist. Rational investors form expectations on the return and risk of a risky asset and…
Recurrence Plot (RP) and Recurrence Quantification Analysis RQA) are signal numerical analysis methodologies able to work with non linear dynamical systems and non stationarity. Moreover they well evidence changes in the states of a…
We study and generalize in various ways the model of rational expectation (RE) bubbles introduced by Blanchard and Watson in the economic literature. First, bubbles are argued to be the equivalent of Goldstone modes of the fundamental…
We propose that large stock market crashes are analogous to critical points studied in statistical physics with log-periodic correction to scaling. We extend our previous renormalization group model of stock market prices prior to and after…
We propose constructing confidence sets for the emergence, collapse, and recovery dates of a bubble separately by inverting tests for the location of the break date. We examine both likelihood ratio-type tests and the Elliott-Muller-type…
Emerging markets such as India provide investors with returns far greater than those in developed markets; taking the average returns from the period 1995 to 2014 the returns are 4.714% to 3.276% of the developed market. The majority of…
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 consider a simple stochastic differential equation for modeling bubbles in social context. A prime example is bubbles in asset pricing, but similar mechanisms may control a range of social phenomena driven by psychological factors (for…
Inspired by the question of identifying the start time $\tau$ of financial bubbles, we address the calibration of time series in which the inception of the latest regime of interest is unknown. By taking into account the tendency of a given…
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…
We present a simple agent-based model to study the development of a bubble and the consequential crash and investigate how their proximate triggering factor might relate to their fundamental mechanism, and vice versa. Our agents invest…