Related papers: Toward Economics as a New Complex System
Large variations in stock prices happen with sufficient frequency to raise doubts about existing models, which all fail to account for non-Gaussian statistics. We construct simple models of a stock market, and argue that the large…
Equity premium, the surplus returns of stocks over bonds, has been an enduring puzzle. While numerous prior works approach the problem assuming the utility of money is invariant across contexts, our approach implies that in efficient…
The non-fungible token (NFT) is an emergent type of cryptocurrency that has garnered extensive attention since its inception. The uniqueness, indivisibility and humanistic value of NFTs are the key characteristics that distinguish them from…
There are two possible ways of interpreting the seemingly stochastic nature of financial markets: the Efficient Market Hypothesis (EMH) and a set of stylized facts that drive the behavior of the markets. We show evidence for some of the…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
Firm foundation theory estimates a security's firm fundamental value based on four determinants: expected growth rate, expected dividend payout, the market interest rate and the degree of risk. In contrast, other views of decision-making in…
Several problems arising in Economics and Finance are analyzed using concepts and quantitative methods from Physics. Here is the abridged abstact: Chapter 1: By analogy with energy, the equilibrium probability distribution of money must…
The origin of economic crises is a key problem for economics. We present a model of long-run competitive markets to show that the multiplicity of behaviors in an economic system, over a long time scale, emerge as statistical regularities…
We present a dynamical theory of asset price bubbles that exhibits the appearance of bubbles and their subsequent crashes. We show that when speculative trends dominate over fundamental beliefs, bubbles form, leading to the growth of asset…
This article is a follow-up of a short essay that appeared in Nature 455, 1181 (2008) [arXiv:0810.5306]. It has become increasingly clear that the erratic dynamics of markets is mostly endogenous and not due to the rational processing of…
Trend and Value are pervasive anomalies, common to all financial markets. We address the problem of their co-existence and interaction within the framework of Heterogeneous Agent Based Models (HABM). More specifically, we extend the…
There is bountiful evidence that political uncertainty stemming from presidential elections or doubt about the direction of future policy make financial markets significantly volatile, especially in proximity to close elections or elections…
The quantitative aspirations of economists and financial analysts have for many years been based on the belief that it should be possible to build models of economic systems - and financial markets in particular - that are as predictive as…
We consider a simple model of rational agents competing in a single product market described by simple linear demand curve. Contrary to accepted economic theory, the agents' production levels synchronise in the absence of conscious…
The Nobel Memorial Prize in Economics has been awarded annually since 1969. Who wins the prize is a topic of much interest and tracks the whole course of the academic discipline over the last 57 years. Explaining who wins the prize in any…
Financial markets provide a natural quantitative lab for understanding some of the most advanced human behaviours. Among them is the use of mathematical tools known as financial instruments. Besides money, the two most fundamental financial…
By investigating nonfungible tokens (NFTs), we provide the first systematic study of retail investor behavior through asset bubbles. Given that NFTs are recorded in public blockchains, we are able to track investor behavior over time,…
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…
It is still common wisdom amongst economists, politicians and lay people that economic growth is a necessity of our social systems, at least to avoid distributional conflicts. This paper challenges such belief moving from a purely physical…
This paper highlights the role of risk neutral investors in generating endogenous bubbles in derivatives markets. We find that a market for derivatives, which has all the features of a perfect market except completeness and has some risk…