Critical market crashes
نویسندگان
چکیده
منابع مشابه
Critical Crashes?
In this short note we discuss recent attempts to describe pre-crash market dynamics with analogies from theory of critical phenomena. Stochastic dynamics is a commonly used approach to describe the time evolution of financial markets. The large number of agents, their complex mutual influence and obscure decision making all of these leave the probabilistic picture as the only viable way to desc...
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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 prices away from their fundamental value. This growth makes the system increasingly susceptible to any exogenous shock, thus eventually precipitating a crash...
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In this paper, we develop an equilibrium model for stock market liquidity and its impact on asset prices when participation in the market is costly. We show that, even when agents’ trading needs are perfectly matched, costly participation prevents them from synchronizing their trades, which gives rise to the endogenous need for liquidity. Moreover, the endogenous liquidity need, when it occurs,...
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Stock-market crashes tend to follow run-ups in prices. These episodes look like bubbles that gradually inflate and then suddenly burst. We show that such bubbles can form in a Zeira-Rob type of model in which demand size is uncertain. Two conditions are sufficient for this to happen: A declining hazard rate in the prior distribution over market size and a positively sloped supply of capital to ...
متن کاملMarket Bubbles and Crashes
Episodes of market crashes have fascinated economists for centuries. Although many academics, practitioners and policy makers have studied questions related to collapsing asset price bubbles, there is little consensus yet about their causes and effects. This review and essay evaluates some of the hypotheses offered to explain the market crashes that often follow asset price bubbles. Starting fr...
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ژورنال
عنوان ژورنال: Physics Reports
سال: 2003
ISSN: 0370-1573
DOI: 10.1016/s0370-1573(02)00634-8