Since 2009, stock markets have resided in a long bull market regime. Passive investment strategies have succeeded during this low-volatility growth period. From 2018 on, however, there was a transition into a more volatile market environment interspersed by corrections increasing in amplitude...

We introduce a novel quantitative methodology to detect real estate bubbles and forecast their critical end time, which we apply to the housing markets of China's major cities. Building on the Log-Periodic Power Law Singular (LPPLS) model of self-reinforcing feedback loops, we use the quantile...

We present a self-consistent model for explosive financial bubbles, which combines a mean-reverting volatility process and a stochastic conditional return which reflects nonlinear positive feedbacks and continuous updates of the investors' beliefs and sentiments. The conditional expected returns...

The financial crisis of 2008, which started with an initially well-defined epicenter focused on mortgage backed securities (MBS), has been cascading into a global economic recession, whose increasing severity and uncertain duration has led and is continuing to lead to massive losses and damage...

By combining (i) the economic theory of rational expectation bubbles, (ii) behavioral finance on imitation and herding of investors and traders and (iii) the mathematical and statistical physics of bifurcations and phase transitions, the logperiodic power law (LPPL) model has been developed as a...

We introduce the concept of “negative bubbles” as the mirror image of standard financial bubbles, in which positive feedback mechanisms may lead to transient accelerating price falls. To model these negative bubbles, we adapt the Johansen-Ledoit-Sornette (JLS) model of rational expectation...

Chapter Summary: We consider the recent financial crisis as an overlapping sequence of interdependent financial bubbles followed by their collapse. Governments and regulatory agencies have made it a prime goal to moderate future crises. Many attempts at financial, economic and social engineering...

We explore a view of the crisis as a shock to investor sentiment that led to the collapse of a bubble or pyramid scheme in financial markets. We embed this view in a standard model of the financial accelerator and explore its empirical and policy implications. In particular, we show how the...