An Econophysics Model of Financial Bubbles

DOI: 10.4236/ns.2015.71006   PDF   HTML   XML   2,881 Downloads   3,750 Views   Citations


Usually financial crises go along with bubbles in asset prices, such as the housing bubble in the US in 2007. This paper attempts to build a mathematical model of financial bubbles from an econophysics, and thus a new perspective. I find that agents identify bubbles only with a time delay. Furthermore, I demonstrate that the detection of bubbles is different on either the individual or collective point of view. Second, I utilize the findings for a new definition of asset bubbles in finance. Finally, I extend the model to the study of asset price dynamics with news. In conclusion, the model provides unique insights into the properties and developments of financial bubbles.

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Herzog, B. (2015) An Econophysics Model of Financial Bubbles. Natural Science, 7, 55-63. doi: 10.4236/ns.2015.71006.

Conflicts of Interest

The authors declare no conflicts of interest.


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