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What is Bubbles and Crashes in Finance Model about?
This document summarizes a research paper that develops a behavioral finance model of bubbles and crashes in asset markets. The model assumes that all agents use simple forecasting rules and switch between rules based on past profitability, representing bounded rationality. This allows bubbles to arise endogenously as fixed point equilibria, unlike in rational expectations models where bubbles are defined as unstable paths. The model generates complex dynamic behavior including unpredictable bubbles and cra
- Author
- Johnny Onthespot
- Language
- EN