We estimate a behavioural heterogeneous agents model with boundedly rational traders who know the fundamental stock price, but disagree about the persistence of deviations from the fundamental. Some agents (fundamentalists) believe in mean-reversion of stock prices, while others (chartists) expect a continuation of the trend. Agents gradually switch between the two rules, based upon their relat...

T his paper investigates the existence of possible spillover effects among four main asset markets namely foreign exchange, stock, gold, and housing markets in Iran from 2002:03 to 2015:06. For this purpose, we have exploited Sigma-Point Kalman Filter (SPKF) to extract the bubble component of assets prices in the aforementioned Markets. Then, in order to analyze the price bubbles spi...

Groups of humans routinely misassign value to complex future events, especially in settings involving the exchange of resources. If properly structured, experimental markets can act as excellent probes of human group-level valuation mechanisms during pathological overvaluations--price bubbles. The connection between the behavioral and neural underpinnings of such phenomena has been absent, in p...

herd behavior by investors in capital markets is a behavioral bias that can cause to undesirable effects such as bubble, crash and high fluctuation in stock price. this anomalies can disturb the equilibrium relations in stock market and lead to market inefficiency. herd behavior is a condition that investors with rational or in rational reasons ignore private information and imitate from others...

This paper studies the interaction between monetary policy and asset prices using a simple general equilibrium model in which asset-price bubbles may form due to herd behavior in investment in a new technology whose productivity is uncertain. The economy is populated with one infinitely lived representative household and overlapping generations of finitely lived entrepreneurs. Entrepreneurs rec...

In this paper we study the effect of induced positive mood on price patterns in experimental asset markets. Smith, Suchanek and Williams (1988) in their seminal paper documented bubbles and crashes in experimental asset markets (i.e., prices exceed fundamental value in the beginning and fall towards or below the fundamental value towards the end of the market). Since then, a number of studies h...

We model the relationship between asset float (tradeable shares) and speculative bubbles. Investors with heterogeneous beliefs and short-sales constraints trade a stock with limited float because of insider lockups. A bubble arises as price overweighs optimists’ beliefs and investors anticipate the option to resell to those with even higher valuations. The bubble’s size depends on float as inve...

We show pathological behavior of asset price processes modeled by continuous strict local martingales under a risk-neutral measure. The inspiration comes from recent results on financial bubbles. We analyze, in particular, the effect of the strict nature of the local martingale on the usual formula for the price of a European call option, especially a strong anomaly when call prices decay monot...

Leverage is strongly related to liquidity in a market and lack of liquidity is considered a cause and/or consequence of the recent financial crisis. A repurchase agreement is a financial instrument where a security is sold simultaneously with an agreement to buy it back at a later date. Repurchase agreements (repos) market size is a very important element in calculating the overall leverage in ...

There is a little doubt in public mind that the dot-com boom on Nasdaq in the end of the 90s represented a stock market bubble. Indeed, major violations of rationality were observed. For instance, some dot-coms, which terminated their business still held positive market value. Market cap of dot-coms, which were parts of established companies sometimes exceeded market caps of their corporate par...