Related papers: Rational Bubbles: A Clarification
A general theory of innovation and progress in human society is outlined, based on the combat between two opposite forces (conservatism/inertia and speculative herding "bubble" behavior). We contend that human affairs are characterized by…
For a rational number $q$, a rational $D(q)$-$n$-tuple is a set of $n$ distinct nonzero rationals $\{a_1, a_2, \dots, a_n\}$ such that $a_ia_j+q$ is a rational square for all $1 \leqslant i < j \leqslant n$. For every $q$ we find all…
Nonmonotonic reasoning is a pattern of reasoning that allows an agent to make and retract (tentative) conclusions from inconclusive evidence. This paper gives a possible-worlds interpretation of the nonmonotonic reasoning problem based on…
We study asset price bubbles in market models with proportional transaction costs $\lambda\in (0,1)$ and finite time horizon $T$ in the setting of [49]. By following [28], we define the fundamental value $F$ of a risky asset $S$ as the…
The aim of this of this paper is to study infinite games and to prove formally some properties in this framework. As a consequence we show that the behavior (the madness) of people which leads to speculative crashes or escalation can be…
Prices in financial markets exhibit extreme jumps far more often than can be accounted for by external news. Further, magnitudes of price changes are correlated over long times. These so called stylized facts are quantified by scaling laws…
The purpose of this article is to propose a new "theory," the Strategic Analysis of Financial Markets (SAFM) theory, that explains the operation of financial markets using the analytical perspective of an enlightened gambler. The gambler…
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 revisit the classic paper of Tirole "Asset Bubbles and Overlapping Generations" (1985, Econometrica), which shows that the emergence of asset bubbles solves the capital over-accumulation problem. While Tirole's main insight holds with…
This is a supplement to the paper "Liquidity based modeling of asset price bubbles via random matching". The supplement is organized as follows. First, we prove Theorem 3.13 in [1] which provides the existence of the dynamical system D…
Common knowledge/belief in rationality is the traditional standard assumption in analysing interaction among agents. This paper proposes a graph-based language for capturing significantly more complicated structures of higher-order beliefs…
A new concept called biased derivative is proposed. It has a potential to better understand and model some aspects of dynamical systems associated with creating bubbles.
In this paper we further extend the optimal bubble riding model proposed by Tangpi and Wang by allowing for price-dependent entry times. Agents are characterized by their individual entry threshold that represents their belief in the…
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,…
We study the range of prices at which a rational agent should contemplate transacting a financial contract outside a given securities market. Trading is subject to nonproportional transaction costs and portfolio constraints and full…
Shiu proved that if a and q are arbitrary coprime integers, then there exist arbitrarily long strings of consecutive primes which are all congruent to a modulo q. We generalize Shiu's theorem to imaginary quadratic fields, where we prove…
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…
This short article is aimed at educators and teachers of mathematics.Its goal is simple and direct:to explore some of the basic/elementary properties of proper rational numbers.A proper rational number is a rational which is not an integer.…
The Johansen-Ledoit-Sornette (JLS) model of rational expectation bubbles with finite-time singular crash hazard rates has been developed to describe the dynamics of financial bubbles and crashes. It has been applied successfully to a large…
A deterministic trading strategy by a representative investor on a single market asset, which generates complex and realistic returns with its first four moments similar to the empirical values of European stock indices, is used to simulate…