Related papers: On Origins of Bubbles
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…
Rational pure bubble models feature multiple (and often a continuum of) equilibria, which makes model predictions and policy analyses non-robust. We show that when the interest rate in the fundamental equilibrium is below the economic…
According to the volatility feedback effect, an unexpected increase in squared volatility leads to an immediate decline in the price-dividend ratio. In this paper, we consider the properties of stock price dynamics and option valuations…
We hypothesize that portfolio sorts based on the V/P ratio generate excess returns and consist of companies that are undervalued for prolonged periods. Results, for the US market show that high V/P portfolios outperform low V/P portfolios…
The aim of this paper is to propose a heterogeneous agent model of stock markets that develop complicated endogenous price fluctuations. We find occurrences of non-stationary chaos, or speculative bubble, are caused by the heterogeneity of…
What is the dominating mechanism of the price dynamics in financial systems is of great interest to scientists. The problem whether and how volatilities affect the price movement draws much attention. Although many efforts have been made,…
We study an overlapping generations (OLG) exchange economy with an asset that yields dividends. First, we derive general conditions, based on exogenous parameters, that give rise to three distinct scenarios: (1) only bubbleless equilibria…
The drift burst hypothesis postulates the existence of short-lived locally explosive trends in the price paths of financial assets. The recent U.S. equity and treasury flash crashes can be viewed as two high-profile manifestations of such…
It is commonly believed that the correlations between stock returns increase in high volatility periods. We investigate how much of these correlations can be explained within a simple non-Gaussian one-factor description with time…
We investigated distributions of short term price trends for high frequency stock market data. A number of trends as a function of their lengths was measured. We found that such a distribution does not fit to results following from an…
This paper addresses the statistical properties of time series driven by rational bubbles a la Blanchard and Watson (1982), corresponding to multiplicative maps, whose study has recently be revived recently in physics as a mechanism of…
Financial price changes obey two universal properties: they follow a power law and they tend to be clustered in time. The second regularity, known as volatility clustering, entails some predictability in the price changes: while their sign…
We present a variation of the well-known binomial model of asset prices. This variation incorporates a bound to short-selling, inspired by a model from Gunduz Caginalp[2]. We formalize this model and prove a formula for all the moments of…
The problem of non-stationarity in financial markets is discussed and related to the dynamic nature of price volatility. A new measure is proposed for estimation of the current asset volatility. A simple and illustrative explanation is…
This study analyses the duration dependence of events that trigger volatility persistence in stock markets. Such events, in our context, are monthly spells of contiguous price decline or negative returns for the S&P500 stock market index…
This article provides a simple explanation of the asymptotic concavity of the price impact of a meta-order via the microstructural properties of the market. This explanation is made more precise by a model in which the local relationship…
We consider in detail an investment strategy, titled "The Bounce Basket", designed for someone to express a bullish view on the market by allowing them to take long positions on securities that would benefit the most from a rally in the…
We investigate a continuous-time investment-consumption problem with model uncertainty in a general diffusion-based market with random model coefficients. We assume that a power utility investor is ambiguity-averse, with the preference to…
The problem of investing into a cryptocurrency market requires good understanding of the processes that regulate the price of the currency. In this paper we offer a view of a cryptocurrency market as an environment for realization 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…