Related papers: Financial bubbles: mechanisms and diagnostics
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…
We study the concept of financial bubble in a market model endowed with a set of probability measures, typically mutually singular to each other. In this setting we introduce the notions of robust bubble and robust fundamental value in a…
This paper proposes a simple and parsimonious discrete-time simulation model to describe the endogenous formation and periodic collapse of financial bubbles. While existing literature has extensively explored the statistical properties of…
The price-bubble and crash process formation is theoretically investigated in a two-asset equilibrium model. Sufficient and necessary conditions are derived for the existence of average equilibrium price dynamics of different agent-based…
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 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…
In the past decade, Bitcoin as an emerging asset class has gained widespread public attention because of their extraordinary returns in phases of extreme price growth and their unpredictable massive crashes. We apply the log-periodic power…
We consider a banking network represented by a system of stochastic differential equations coupled by their drift. We assume a core-periphery structure, and that the banks in the core hold a bubbly asset. The banks in the periphery have not…
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…
A taxonomy of large financial crashes proposed in the literature locates the burst of speculative bubbles due to endogenous causes in the framework of extreme stock market crashes, defined as falls of market prices that are outlier with…
We present a detailed bubble analysis of the Bitcoin to US Dollar price dynamics from January 2012 to February 2018. We introduce a robust automatic peak detection method that classifies price time series into periods of uninterrupted…
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…
In the current environment of financial distress, many governments are likely to soon become major holders of financial assets, but the policy debate focuses only on the likelihood and extent of short-term market stabilization. This paper…
We argue that the present crisis and stalling economy continuing since 2007 are rooted in the delusionary belief in policies based on a "perpetual money machine" type of thinking. We document strong evidence that, since the early 1980s,…
The principal aim of this work is the evidence on empirical way that catastrophic bifurcation breakdowns or transitions, proceeded by flickering phenomenon, are present on notoriously significant and unpredictable financial markets.…
The understanding of complex systems has become a central issue because complex systems exist in a wide range of scientific disciplines. Time series are typical experimental results we have about complex systems. In the analysis of such…
We present a general equilibrium macro-finance model with a positive feedback loop between capital investment and land price. As leverage is relaxed beyond a critical value, through the financial accelerator, a phase transition occurs from…
This paper introduces a new approach for bubble detection based on mixed causal and noncausal autoregressive processes and their tail process representation during an explosive episode. Departing from traditional definitions of bubbles as…
Crashes have fascinated and baffled many canny observers of financial markets. In the strict orthodoxy of the efficient market theory, crashes must be due to sudden changes of the fundamental valuation of assets. However, detailed empirical…
We propose two rational expectation models of transient financial bubbles with heterogeneous arbitrageurs and positive feedbacks leading to self-reinforcing transient stochastic faster-than-exponential price dynamics. As a result of the…