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...

There have been many attempts, theoretical and empirical, to explain the persistence of a favorite-longshot bias in various horse betting markets. Most recently, Snowberg and Wolfers (2010) have shown that the data for the US markets support a misperceptions of probability approach in line with...