From Rational Bubbles to Crashes
We study and generalize in various ways the model of rational expectation (RE) bubbles introduced by Blanchard and Watson in the economic literature. First, bubbles are argued to be the equivalent of Goldstone modes of the fundamental rational pricing equation, associated with the symmetry-breaking introduced by non-vanishing dividends. Generalizing bubbles in terms of multiplicative stochastic maps, we summarize the result of Lux and Sornette that the no-arbitrage condition imposes that the tail of the return distribution is hyperbolic with an exponent mu
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Y. Malevergne & D. Sornette, 2001. "Multi-dimensional rational bubbles and fat tails," Quantitative Finance, Taylor & Francis Journals, vol. 1(5), pages 533-541.
- De Vries, C.G. & Leuven, K.U., 1994. "Stylized Facts of Nominal Exchange Rate Returns," Papers 94-002, Purdue University, Krannert School of Management - Center for International Business Education and Research (CIBER).
- Lux, Thomas & Sornette, Didier, 2002.
"On Rational Bubbles and Fat Tails,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 34(3), pages 589-610, August.
- D. Sornette, 2000. ""Slimming" of power law tails by increasing market returns," Papers cond-mat/0010112, arXiv.org, revised Sep 2001.
- Shleifer, Andrei, 2000. "Inefficient Markets: An Introduction to Behavioral Finance," OUP Catalogue, Oxford University Press, number 9780198292272, December.
When requesting a correction, please mention this item's handle: RePEc:arx:papers:cond-mat/0102305. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (arXiv administrators)
If references are entirely missing, you can add them using this form.