Related papers: Financial bubbles: mechanisms and diagnostics
We study a rational expectation model of bubbles and crashes. The model has two components : (1) our key assumption is that a crash may be caused by local self-reinforcing imitation between noise traders. If the tendency for noise traders…
We study the emergence of instabilities in a stylized model of a financial market, when different market actors calculate prices according to different (local) market measures. We derive typical properties for ensembles of large random…
We take inspiration from statistical physics to develop a novel conceptual framework for the analysis of financial markets. We model the order book dynamics as a motion of particles and define the momentum measure of the system as a way to…
We define and study a rather complex market model, inspired from the Santa Fe artificial market and the Minority Game. Agents have different strategies among which they can choose, according to their relative profitability, with the…
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…
The log-periodic power law (LPPL) is a model of asset prices during endogenous bubbles. A major open issue is to verify the presence of LPPL in price sequences and to estimate the LPPL parameters. Estimation is complicated by the fact that…
Speculative bubbles exhibit common statistical signatures across many financial markets, suggesting the presence of universal underlying mechanisms. We test this hypothesis in the Iranian stock market, an economy that is highly isolated,…
We seek to deepen understanding of the micro-foundations of institutionalization while contributing to a sociological theory of markets by investigating the puzzle of price bubbles in financial markets. We find that such markets, despite…
Economic and financial time series can feature locally explosive behavior when a bubble is formed. The economic or financial bubble, especially its dynamics, is an intriguing topic that has been attracting longstanding attention. To…
We show that power-law analyses of financial commentaries from newspaper web-sites can be used to identify stock market bubbles, supplementing traditional volatility analyses. Using a four-year corpus of 17,713 online, finance-related…
In this paper we employ deep learning techniques to detect financial asset bubbles by using observed call option prices. The proposed algorithm is widely applicable and model-independent. We test the accuracy of our methodology in numerical…
Prediction of events in financial markets is every investor's dream and, usually, wishful thinking. From a more general, economic and societal viewpoint, the identification of indicators for large events is highly desirable to assess…
We develop a stochastic macro-financial model in continuous time by integrating two specifications of the Keen economic framework with a financial market driven by a jump-diffusion process. The economic block of the model combines monetary…
In normal times, it is assumed that financial institutions operating in non-overlapping sectors have complementary and distinct outcomes, typically reflected in mostly uncorrelated outcomes and asset returns. Such is the reasoning behind…
The basis of arbitrage methods depends on the circulation of information within the framework of the financial market. Following the work of Modigliani and Miller, it has become a vital part of discussions related to the study of financial…
Using a recently introduced rational expectation model of bubbles, based on the interplay between stochasticity and positive feedbacks of prices on returns and volatility, we develop a new methodology to test how this model classifies 9…
Systemic financial risk refers to the simultaneous failure or destabilization of multiple financial institutions, often triggered by contagion mechanisms or common exposures to shocks. In this paper, we present a dynamical model of bank…
We present a detailed methodological study of the application of the modified profile likelihood method for the calibration of nonlinear financial models characterised by a large number of parameters. We apply the general approach to the…
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…
We discuss several models in order to shed light on the origin of power-law distributions and power-law correlations in financial time series. From an empirical point of view, the exponents describing the tails of the price increments…