Related papers: Rational Bubbles Attached to Real Assets
Humans display a tendency to pay more attention to bad outcomes, often in a disproportionate way relative to their statistical occurrence. They also display euphorism, as well as a preference for the current state of affairs (status quo…
Small bubbles rising in a chain can self-organize into regular patterns upon reaching a liquid's free surface. This phenomenon is investigated through direct numerical simulations. By varying the bubble release period, distinct branching…
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…
We propose a novel model, the Hyped Log-Periodic Power Law Model (HLPPL), to the problem of quantifying and detecting financial bubbles, an ever-fascinating one for academics and practitioners alike. Bubble labels are generated using a…
The standard criterion of rationality in economics is the maximization of a utility function that is stable across multiple observations of an agent's choice behavior. In this paper, we discuss two notions of the money pump that…
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…
To choose between two discrete goods, a consumer pays attention to only those with prices below a threshold. From these, she chooses her most preferred good. We assume consumers in a population have the same preference but may have…
The existence of the pricing kernel is shown to imply the existence of an ambient information process that generates market filtration. This information process consists of a signal component concerning the value of the random variable X…
The spontaneous formation of tiny bubbles in a liquid is at the root of the nucleation mechanism during the liquid-to-vapor transition of a metastable liquid. The smaller the bubbles the larger their probability to appear, and even for…
The evolution of spherically symmetric unstable scalar field configurations (``bubbles'') is examined for both symmetric (SDWP) and asymmetric (ADWP) double-well potentials. Bubbles with initial static energies $E_0\la E_{{\rm crit}}$,…
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…
In the model of Chain Inflation, a sequential chain of coupled scalar fields drives inflation. We consider a multidimensional potential with a large number of bowls, or local minima, separated by energy barriers: inflation takes place as…
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…
This study presents a three-step machine learning framework to predict bubbles in the S&P 500 stock market by combining financial news sentiment with macroeconomic indicators. Building on traditional econometric approaches, the proposed…
In the picture of eternal inflation as driven by a scalar potential with multiple minima, our observable universe resides inside one of many bubbles formed from transitions out of a false vacuum. These bubbles necessarily collide, upsetting…
Inheritances, divorces or liquidations of companies require common assets to be divided among the entitled parties. Legal methods usually consider the market value of goods, while fair division theory takes into account the parties'…
In order to properly manage risk, practitioners must understand the aggregate risks they are exposed to. Additionally, to properly price policies and calculate bonuses the relative riskiness of individual business units must be well…
We introduce a new diffusion process Xt to describe asset prices within an economic bubble cycle. The main feature of the process, which differs from existing models, is the drift term where a mean-reversion is taken based on an exponential…
Existence of stochastic financial equilibria giving rise to semimartingale asset prices is established under a general class of assumptions. These equilibria are expressed in real terms and span complete markets or markets with withdrawal…
This paper proposes a simple and parsimonious discrete-time simulation model to describe the endogenous formation and periodic collapse of financial bubbles. While existing literature has extensively explored the statistical properties of…