A Theory of Speculative Bubbles and Crashes : A study on phase transitions in financial markets with networked agents

Most of us would accept that recent large economic fluctuations have been caused by crashes of speculative bubbles in asset markets.For example, few would disagree that the most important cause of the global financial crisis in 2008 was the collapse of an unprecedented bubble in U.S. housing markets. However, the reasons why bubbles frequently occur in various financial markets, and why bubbles collapse are not always well understood.The book provides a new theoretical explanation of bubbles and crashes to help answer questions relating to how asset bubbles come about, why they persist, and the causes of the subsequent crashes. In this innovative volume, Taisei Kaizoji proposes a stock market model in which noise traders and fundamentalists who follow the traditional asset pricing model coexist.A distinctive feature of this study is that the so called noise-trader’s behavior is modeled in a framework of Keynes’ beauty contest metaphor.The author elucidate a mechanism in which (i) noise