Related papers: A Consistent Model of `Explosive' Financial Bubble…
The Johansen-Ledoit-Sornette (JLS) model of rational expectation bubbles with finite-time singular crash hazard rates has been developed to describe the dynamics of financial bubbles and crashes. It has been applied successfully to a large…
In this study, we extend the three-regime bubble model of Pang et al. (2021) to allow the forth regime followed by the unit root process after recovery. We provide the asymptotic and finite sample justification of the consistency of the…
Inflation is part of the Standard Model of the Universe supported by CMB and large scale structure LSS datasets. This review presents new developments of inflation in three main chapters. (I): The effective theory of inflation a la…
Several authors have noticed the signature of log-periodic oscillations prior to large stock market crashes [cond-mat/9509033, cond-mat/9510036, Vandewalle et al 1998]. Unfortunately good fits of the corresponding equation to stock market…
In the aftermath of the burst of the ``new economy'' bubble in 2000, the Federal Reserve aggressively reduced short-term rates yields in less than two years from 6.5% to 1.25% in an attempt to coax forth a stronger recovery of the US…
Episodes of market crashes have fascinated economists for centuries. Although many academics, practitioners and policy makers have studied questions related to collapsing asset price bubbles, there is little consensus yet about their causes…
This paper presents a novel one-factor stochastic volatility model where the instantaneous volatility of the asset log-return is a diffusion with a quadratic drift and a linear dispersion function. The instantaneous volatility mean reverts…
Standard quantitative models of the stock market predict a log-normal distribution for stock returns (Bachelier 1900, Osborne 1959), but it is recognised (Fama 1965) that empirical data, in comparison with a Gaussian, exhibit leptokurtosis…
We extend the model of rational bubbles of Blanchard and of Blanchard and Watson to arbitrary dimensions d: a number d of market time series are made linearly interdependent via d times d stochastic coupling coefficients. We first show that…
We study asset price bubbles in market models with proportional transaction costs $\lambda\in (0,1)$ and finite time horizon $T$ in the setting of [49]. By following [28], we define the fundamental value $F$ of a risky asset $S$ as the…
We study historical correlations and lead-lag relationships between individual stock risk (volatility of daily stock returns) and market risk (volatility of daily returns of a market-representative portfolio) in the US stock market. We…
This paper studies the equilibrium price of a continuous time asset traded in a market with heterogeneous investors. We consider a positive mean reverting asset and two groups of investors who have different beliefs on the speed of mean…
This paper is devoted to testing for the explosive bubble under time-varying non-stationary volatility. Because the limiting distribution of the seminal Phillips et al. (2011) test depends on the variance function and usually requires a…
We study, both analytically and numerically, an ARCH-like, multiscale model of volatility, which assumes that the volatility is governed by the observed past price changes on different time scales. With a power-law distribution of time…
We develop a theoretical trading conditioning model subject to price volatility and return information in terms of market psychological behavior, based on analytical transaction volume-price probability wave distributions in which we use…
This paper discusses and analyzes a class of likelihood models which are based on two distributional innovations in financial models for stock returns. That is, the notion that the marginal distribution of aggregate returns of log-stock…
A ``bubble universe'' nucleating in an eternally inflating false vacuum will experience, in the course of its expansion, collisions with an infinite number of other bubbles. In an idealized model, we calculate the rate of collisions around…
The financial crisis of 2008, which started with an initially well-defined epicenter focused on mortgage backed securities (MBS), has been cascading into a global economic recession, whose increasing severity and uncertain duration has led…
We analyze a controlled price formation experiment in the laboratory that shows evidence for bubbles. We calibrate two models that demonstrate with high statistical significance that these laboratory bubbles have a tendency to grow faster…
We apply two non-parametric methods to test further the hypothesis that log-periodicity characterizes the detrended price trajectory of large financial indices prior to financial crashes or strong corrections. The analysis using the…