We present a dynamic Rational Expectations (RE) bubble model of prices with the intention to evaluate it on optimal investment strategies applied to Bitcoin. Our bubble model is defined as a geometric Brownian motion combined with separate crash (and rally) discrete jump distributions associated...

We introduce a model of super-exponential financial bubbles with two assets (risky and risk-free), in which fundamentalist and chartist traders co-exist. Fundamentalists form expectations on the return and risk of a risky asset and maximize their constant relative risk aversion expected utility...

We present an agent-based model (ABM) of a financial market with n 1 risky assets, whose price dynamics result from the interaction between rational fundamentalists and trend following imitative noise traders. The interactions and opinion formation of the noise traders are described by an...

Between June 2005 and October 2007, when it peaked, the Chinese stock market rose five-fold. It then went into free fall losing 70% of its value over the following year, more than China’s total GDP. A similar trajectory played out between July 2014 and January 2016.This paper describes the...

In the financial markets, contradictory opinions generate a set of constraints which mediate information through a system of expected target prices. As a result, prices are a measure of value as much as they are an indication of how these expectations concerning value remain valid. Thus, path...

Reviewing the definition and measurement of speculative bubbles in context of contagion, this paper analyses the DotCom bubble in American and European equity markets using the dynamic conditional correlation (DCC) model proposed as on one hand as an econometrics explanation and on the other...

This paper provides direct evidence of leverage-induced fire sales leading to a major stock market crash. Our analysis uses proprietary account-level trading data for brokerage- and shadow-financed margin accounts during the Chinese stock market crash in the summer of 2015. We find that margin...

This paper examines the effects of fear of coronavirus on returns and volatility of five major cryptocurrencies during the COVID-19 outbreak. Adopting Google search volume on a comprehensive list of coronavirus-related terms to construct a gauge of fear, we show that daily innovations in...

Terra, the third largest cryptocurrency ecosystem after Bitcoin and Ethereum, collapsed in three days in May 2022 and wiped out $50 billion in valuation. At the center of the collapse was a run on a blockchain-based borrowing and lending protocol (Anchor) that promised high yields to its...

In this paper, we investigate the impact of market sentiment on cryptocurrency returns. To accomplish this, we use a novel dataset that captures a multitude of attitudes, moods, and emotions extracted from a vast amount of news and social media content. Our findings indicate that social media...