Related papers: Fearless versus Fearful Speculative Financial Bubb…
Recent empirical studies suggest that the volatilities associated with financial time series exhibit short-range correlations. This entails that the volatility process is very rough and its autocorrelation exhibits sharp decay at the…
Based on our "finance-prediction-oriented" methodology which involves such elements as log-periodic self-similarity, the universal preferred scaling factor lambda=2, and allows a phenomenon of the "super-bubble" we analyze the 2009 world…
This paper deals with asset price bubbles modeled by strict local martingales. With any strict local martingale, one can associate a new measure, which is studied in detail in the first part of the paper. In the second part, we determine…
In this paper, we address one of the main puzzles in finance observed in the stock market by proponents of behavioral finance: the stock predictability puzzle. We offer a statistical model within the context of rational finance which can be…
In the current environment of financial distress, many governments are likely to soon become major holders of financial assets, but the policy debate focuses only on the likelihood and extent of short-term market stabilization. This paper…
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…
We clarify the status of log-periodicity associated with speculative bubbles preceding financial crashes. In particular, we address Feigenbaum's [2001] criticism and show how it can be rebuked. Feigenbaum's main result is as follows: ``the…
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 thesis mainly focuses on two problems in capital structure and individual's life-cycle portfolio choice. In the first problem, we derive a stochastic control model to optimize banks' dividend and recapitalization policies and calibrate…
We analyze a controlled price formation experiment in the laboratory that shows evidence for bubbles. We calibrate two models that demonstrate with high statistical significance that these laboratory bubbles have a tendency to grow faster…
The study of the critical dynamics in complex systems is always interesting yet challenging. Here, we choose financial market as an example of a complex system, and do a comparative analyses of two stock markets - the S&P 500 (USA) and…
In this paper, we propose the uncertain volatility models with stochastic bounds. Like the regular uncertain volatility models, we know only that the true model lies in a family of progressively measurable and bounded processes, but instead…
Stochastic volatility processes with heavy-tailed innovations are a well-known model for financial time series. In these models, the extremes of the log returns are mainly driven by the extremes of the i.i.d. innovation sequence which leads…
Multiplicative random cascade model naturally reproduces the intermittency or multifractality, which is frequently shown among hierarchical complex systems such as turbulence and financial markets. As described herein, we investigate the…
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…
The principal aim of this work is the evidence on empirical way that catastrophic bifurcation breakdowns or transitions, proceeded by flickering phenomenon, are present on notoriously significant and unpredictable financial markets.…
We study the impact of volatility on intraday serial correlation, at time scales of less than 20 minutes, exploiting a data set with all transaction on SPX500 futures from 1993 to 2001. We show that, while realized volatility and intraday…
We show that the leading bubble test suffers severe size distortion when fundamentals incorporate general-purpose technology adoption. Embedding a hump-shaped technology shock in the Campbell-Shiller present-value model, we prove that the…
In this paper we test for the sensitive dependence on initial conditions (the so called "butterfly effect") of energy futures time series (heating oil, natural gas), and thus the determinism of those series. This paper is distinguished from…
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…