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Super-exponential RE bubble model with efficient crashes
Kreuser, Jerome; Sornette, Didier - 2017
We propose a dynamic Rational Expectations (RE) bubble model of prices with the intention to exploit it for and evaluate it on optimal investment strategies. Our bubble model is defined as a geometric Brownian motion combined with separate crash (and rally) discrete jump distributions associated...
Persistent link: https://www.econbiz.de/10011865575
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Bitcoin bubble trouble
Kreuser, Jérôme; Sornette, Didier - 2018 - Revised 18-Jun-18
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...
Persistent link: https://www.econbiz.de/10011899594
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The Role of diversification risk in financial bubbles
Yan, Wanfeng; Woodard, Ryan; Sornette, Didier - Department of Management, Technology and Economics …
``Zipf factor'', which describes the diversification risk of the stock market portfolio. Keeping all the dynamical … stock gains over time. This allows us to understand better the risk diversification and to explain the investors' behavior … the risk of a lack of diversification, therefore enhancing the role of the Zipf factor. For bubble 2, the Zipf factor is …
Persistent link: https://www.econbiz.de/10011161410
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Follow the money: The monetary roots of bubbles and crashes
CORSI, Fulvio; SORNETTE, Didier
We propose a reduced form model for the Minskian dynamics of liquidity and of asset prices in terms of the so-called financial accelerator mechanism. In a nutshell, credit creation is driven by the market value of the financial assets employed as collateral in the bank loans. This leads to a...
Persistent link: https://www.econbiz.de/10011261704
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How market intervention can prevent bubbles and crashes
Westphal, Rebecca; Sornette, Didier - 2020
Using an agent-based model (ABM) with fundamentalists and chartists, prone to develop bubbles and crashes, we demonstrate the usefulness of direct market intervention by a policy maker, documenting strong performance in preventing bubbles and drawdowns and augmenting significantly the welfare of...
Persistent link: https://www.econbiz.de/10012271219
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Birth or burst of financial bubbles : which one is easier to diagnose?
Demos, Guilherme; Zhang, Qunzhi; Sornette, Didier - 2015
Abreu and Brunnermeier (2003) have argued that bubbles are not suppressed by arbitrageurs because they fail to synchronise on the uncertain beginning of the bubble. We propose an indirect quantitative test of this hypothesis and confront it with the alternative according to which bubbles persist...
Persistent link: https://www.econbiz.de/10011507794
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Modified profile likelihood inference and interval forecast of the burst of financial bubbles
Filimonov, Vladimir; Demos, Guilherme; Heinimann, Hans … - 2016
We present a detailed methodological study of the application of the modified profile likelihood method for the calibration of nonlinear financial models characterised by a large number of parameters. We apply the general approach to the Log-Periodic Power Law Singularity (LPPLS) model of...
Persistent link: https://www.econbiz.de/10011514498
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Bubbles for Fama from Sornette
Zhao, Dongshuai; Sornette, Didier - 2021
Galvanized by the claims of Greenwood et al. in Bubbles for Fama that “a sharp price increase of an industry portfolio does not, on average, predict unusually low returns going forward”, and Fama’s quote (June, 2016) that “Statistically, people have not come up with ways of identifying...
Persistent link: https://www.econbiz.de/10012800716
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Clarifications to Questions and Criticisms on the Johansen-Ledoit-Sornette Bubble Model
SORNETTE, Didier; Woodard, Ryan; Yan, Wanfeng; Zhou, …
The Johansen-Ledoit-Sornette (JLS) model of rational expectation bubbles with finite-time singular crash hazard rates has been developed to describe the dynamics of financial bubbles and crashes. It has been applied successfully to a large variety of financial bubbles in many different markets....
Persistent link: https://www.econbiz.de/10010550273
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Role of diversification risk in financial bubbles
Yan, Wanfeng; Woodard, Ryan; Sornette, Didier - 2011
Zipf factorʺ, which describes the diversification risk of the stock market portfolio. Keeping all the dynamical … stock gains over time. This allows us to understand better the risk diversification and to explain the investors behavior … the risk of a lack of diversification, therefore enhancing the role of the Zipf factor. For bubble 2, the Zipf factor is …
Persistent link: https://www.econbiz.de/10009273110