Related papers: Financial bubbles: mechanisms and diagnostics
We describe a financial market model which shows a non-equilibrium phase transition. Near the transition punctuated equilibrium behaviour is seen, with avalanches occuring on all scales. This scaling is described by an exponent very near 1.…
We investigate financial market correlations using random matrix theory and principal component analysis. We use random matrix theory to demonstrate that correlation matrices of asset price changes contain structure that is incompatible…
We consider dynamics of financial markets as dynamics of expectations and discuss such a dynamics from the point of view of phenomenological thermodynamics. We describe a financial Carnot cycle and the financial analogue of a heat machine.…
We study the disequilibrium dynamics of a stylised model of production networks in which firms use perishable and non-substitutable intermediate inputs, so that adverse idiosyncratic productivity shocks can trigger downstream shortages and…
A slender object undergoing an axial compression will buckle to alleviate the stress. Typically the morphology of the deformed object depends on the bending stiffness for solids, or the viscoelastic properties for liquid threads. We study a…
We investigate bubble dynamics in a holographic superfluid undergoing a first-order phase transition with spontaneous $U(1)$ symmetry breaking. Near the nucleation threshold, the system exhibits universal critical behavior governed by a…
Investors in stock market are usually greedy during bull markets and scared during bear markets. The greed or fear spreads across investors quickly. This is known as the herding effect, and often leads to a fast movement of stock prices.…
In this paper, we propose a dynamical model to capture cascading failures among interconnected organizations in the global financial system. Failures can take the form of bankruptcies, defaults, and other insolvencies. The network that…
This paper introduces a novel approach to financial crisis prediction by establishing a thermodynamic-like framework derived from the fluctuation theorem of statistical physics. We define market temperature through the probability ratio of…
Business cycles (a periodic change of e.g. GDP over five to ten years) exist, but a proper explanation for it is still lacking. Here we extend the well-known NAIRU (non-accelerating inflation rate of unemployment) model, resulting in a set…
This is the second installment of the Financial Bubble Experiment. Here we provide the digital fingerprint of an electronic document in which we identify 7 bubbles in 7 different global assets; for 4 of these assets, we present windows of…
We present a simple transformation of the formulation of the log-periodic power law formula of the Johansen-Ledoit-Sornette model of financial bubbles that reduces it to a function of only three nonlinear parameters. The transformation…
This paper examines the dynamic interaction between falling and rising markets for both the real and the financial sectors of the largest economy in the world using asymmetric causality tests. These tests require that each underlying…
The economical world consists of a highly interconnected and interdependent network of firms. Here we develop temporal and structural network tools to analyze the state of the economy. Our analysis indicates that a strong clustering can be…
We present an analysis of oil prices in US$ and in other major currencies that diagnoses unsustainable faster-than-exponential behavior. This supports the hypothesis that the recent oil price run-up has been amplified by speculative…
The dynamics of prices in financial markets has been studied intensively both experimentally (data analysis) and theoretically (models). Nevertheless, a complete stochastic characterization of volatility is still lacking. What it is well…
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 exploit a recent computational framework to model and detect financial crises in stock markets, as well as shock events in cryptocurrency markets, which are characterized by a sudden or severe drop in prices. Our method manages to detect…
The contradiction between physical and economical sciences concerning the growth of the production/consumption mechanism is analyzed. It is then shown that if one wishes to keep the security level stable or to enhance it in a growing…
In this brief review, we critically examine the recent work done on correlation-based networks in financial systems. The structure of empirical correlation matrices constructed from the financial market data changes as the individual stock…