English (United Kingdom)

https://curated-unify.zendy.io/wp-json/zendy-region/v1/featured_content/oa?rat=en

https://curated-unify.zendy.io/wp-json/zendy-region/v1/highlighted_journal/

Global: Zendy Plus annual

Presents the access of premium content as premium feature

Premium Content

Presents the keyphrase highlighting as premium feature

Keyphrase Highlighting

Presents the summarisation as premium feature

Summarisation

Insights

Presents the pdf analysis as premium feature

PDF Analysis

Presents the zaia usage as premium feature

ZAIA

Global: Zendy Plus monthly

Global: Zendy Tools annual

Global: Zendy Tools monthly

Global: Zendy Free Plan

We introduce a model of super-exponential financial bubbles with two assets(risky and risk-free), in which rational investors and noise traders co-exist.Rational investors form expectations on the return and risk of a risky assetand maximize their constant relative risk aversion expected utility withrespect to their allocation on the risky asset versus the risk-free asset.Noise traders are subjected to social imitation and follow momentum trading.Allowing for random time-varying herding propensity, we are able to reproduceseveral well-known stylized facts of financial markets such as a fat-taildistribution of returns and volatility clustering. In particular, we observetransient faster-than-exponential bubble growth with approximate log-periodicbehavior and give analytical arguments why this follows from our framework. Themodel accounts well for the behavior of traders and for the price dynamics thatdeveloped during the dotcom bubble in 1995-2000. Momentum strategies are shownto be transiently profitable, supporting these strategies as enhancing herdingbehavior.

Super-exponential endogenous bubbles in an equilibrium model of rational and noise traders