This paper offers a new class of models for the term structure of forward interest rates. We allow each instantaneous forward rate to be driven by a different stochastic shock, but constrain the shocks so that the forward rate curve is kept continuous. We term the shocks to the forward curve...

Zipf's law states that, for most countries, the number of firms with size greater than S is inversely proportional to S. Most explanations start with Gibrat's rule of proportional growth but need to incorporate additional constraints and ingredients introducing deviations from it. We show that...

We present a novel methodology to determine the fundamental value of firms in the social-networking sector, motivated by recent realized IPOs and by reports that suggest sky-high valuations of firms such as Facebook, Groupon, LinkedIn Corp., Pandora Media Inc, Twitter, Zynga. Our valuation of...

The heavy-tailed distribution of firm sizes first discovered by Zipf (1949) is one of the best established empirical facts in economics. We show that it has strong implications for asset pricing. Due to the concentration of the market portfolio when the distribution of the capitalization of...

We present a detailed synthesis of the development of the Human Genome Project (HGP) from 1986 to 2003 in order to test the “social bubble” hypothesis that strong social interactions between enthusiastic supporters of the HGP weaved a network of reinforcing feedbacks that led to a widespread...

We review the “social bubble” hypothesis, which holds that strong social interactions between enthusiastic supporters of new ventures weave a network of reinforcing feedbacks that lead to a widespread endorsement and extraordinary commitment by those involved in the projects, beyond what...

Following Levy and Roll [2010], we posit that the market portfolio is the efficient tangent Markowitz portfolio, i.e., it is mean-variance efficient. We then reverse engineer the expected returns and variance terms with constraints imposed by empirical data on a hierarchy of asset baskets. This...

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 than exponential due to positive feedback. We show that...

We present a novel methodology to determine the fundamental value of firms in the social networking sector, motivated by recent realized IPOs and by reports that suggest sky-high valuations of firms such as facebook, Groupon, LinkedIn Corp., Pandora Media Inc, Twitter, Zynga. Our valuation of...

We inspect the price volatility before, during, and after financial asset bubbles in order to uncover possible commonalities and check empirically whether volatility might be used as an indicator or an early warning signal of an unsustainable price increase and the associated crash. Some...