Related papers: Toward Economics as a New Complex System
The efficient market hypothesis (EMH) famously stated that prices fully reflect the information available to traders. This critically depends on the transfer of information into prices through trading strategies. Traders optimise their…
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…
The bubble is a controversial and important issue. Many methods which based on the rational expectation have been proposed to detect the bubble. However, for some developing countries, epically China, the asset markets are so young that for…
Market efficiency at least requires the absence of weak arbitrage opportunities, but this is not sufficient to establish a situation where the market is sensitive, i.e., where it "fully reflects" or "rapidly adjusts to" some information…
Between 1957-1985, Chinese mathematician Loo-Keng Hua pioneered economic optimization theory through three key contributions: establishing economic stability's fundamental theorem, proving the uniqueness of equilibrium solutions in economic…
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…
In speculative markets, risk-free profit opportunities are eliminated by traders exploiting them. Markets are therefore often described as "informationally efficient", rapidly removing predictable price changes, and leaving only residual…
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…
We amend and extend the Chiarella model of financial markets to deal with arbitrary long-term value drifts in a consistent way. This allows us to improve upon existing calibration schemes, opening the possibility of calibrating individual…
This article provides a self-contained overview of the theory of rational asset price bubbles. We cover topics from basic definitions, properties, and classical results to frontier research, with an emphasis on bubbles attached to real…
This Chapter is written for the Festschrift celebrating the 70th birthday of the distinguished economist Duncan Foley from the New School for Social Research in New York. This Chapter reviews applications of statistical physics methods,…
Starting from a plausible assumption about the Total Revenue concept, a system of economic agents, that simulates the exchange of goods, is studied. Following a methodology equivalent to that used in the statistical-mechanical determination…
Efficient Market Hypothesis is the popular theory about stock prediction. With its failure much research has been carried in the area of prediction of stocks. This project is about taking non quantifiable data such as financial news…
Markets have internal dynamics leading to excess volatility and other phenomena that are difficult to explain using rational expectations models. This paper studies these using a nonequilibrium price formation rule, developed in the context…
The substantial turmoil created by both 2000 dot-com crash and 2008 subprime crisis has fueled the belief that the two classical paradigms of economics, which are the invisible hand and the rational agent, are not appropriate to describe…
The relevance of Adam Smith for understanding human morality and sociality is recognized in the growing interest in his work on moral sentiments among scholars of various academic backgrounds. But, paradoxically, Adam Smith's theory of…
Standard economic theory assumes that agents in markets behave rationally. However, the observation of extremely large fluctuations in the price of financial assets that are not correlated to changes in their fundamental value, as well as…
We study a simple model of an asset market with informed and non-informed agents. In the absence of non-informed agents, the market becomes information efficient when the number of traders with different private information is large enough.…
Financial markets typically exhibit dynamically complex properties as they undergo continuous interactions with economic and environmental factors. The Efficient Market Hypothesis indicates a rich difference in the structural complexity of…
The first (Russian) edition of the book was among the first monographs on econophysics. The book gives an explanation of several intriguing phenomena, providing new insights and answers to some deeply vexing questions. Why the economic…