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A Mathematical Model of Financial Bubbles: A Behavioral Approach.
- Source :
-
Mathematics (2227-7390) . Oct2023, Vol. 11 Issue 19, p4102. 17p. - Publication Year :
- 2023
-
Abstract
- In this work, we propose a mathematical model to describe the price trends of unsustainable growth, abrupt collapse, and eventual stabilization characteristic of financial bubbles. The proposed model uses a set of ordinary differential equations to depict the role played by social contagion and herd behavior in the formation of financial bubbles from a behavioral standpoint, in which the market population is divided into neutral, bull (optimistic), bear (pessimistic), and quitter subgroups. The market demand is taken to be a function of both price and bull population, and the market supply is taken to be a function of both price and bear population. In such a manner, the spread of optimism and pessimism controls the supply and demand dynamics of the market and offers a dynamical characterization of the asset price behavior of a financial bubble. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 22277390
- Volume :
- 11
- Issue :
- 19
- Database :
- Academic Search Index
- Journal :
- Mathematics (2227-7390)
- Publication Type :
- Academic Journal
- Accession number :
- 172986113
- Full Text :
- https://doi.org/10.3390/math11194102