Skip to main content
SpringerLink
Log in
Book cover

Long Memory in Economics pp 311–344Cite as

The Microeconomic Foundations of Instability in Financial Markets

  • Chapter

This is a preview of subscription content, log in via an institution.

Chapter
USD   29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD   84.99
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD   109.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD   109.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Learn about institutional subscriptions

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Allen, F., Morris, S. and Shin, H-S. (2003). Beauty contests, bubbles and iterated expectations in asset markets capital adequacy regulation. In: Search of a Rationale, Center for Financial Institutions Working Papers 03-06, Wharton School Center for Financial Institutions, University of Pennsylvania.

    Google Scholar 

  2. Anderson, S., De Palma, A., and Thisse, J. (1993). Discrete Choice Theory of Product Differentiation. MIT Press, Cambridge, MA

    MATH  Google Scholar 

  3. Avery C., and Zemsky, P. (1998). Multidimensionnal uncertainty and herd behaviour in financial markets, American Economic Review, 88, 724–748.

    Google Scholar 

  4. Bancchetta, P. and van Wincoop, E. (2003). Can information heterogeneity explain the exchange rate determination puzzle, Preprint

    Google Scholar 

  5. Blanchard, O. and Watson, M.W. (1982). Bubbles, rational expectations and financial markets. In: Wachsel P. (ed) Crisis in the Economic and Financial System. Lexington Books, Lexington Mass.

    Google Scholar 

  6. Blume, L. (1993). The statistical mechanics of strategic interaction. Games and Economic Behaviour, 5, 387–424.

    Article  MATH  MathSciNet  Google Scholar 

  7. Brock, W A. (1993). Pathways to randomness in the economy: emergent nonlinearity and chaos in economics and finance. Estudios Economicos, 8, No 1, E1 Colegio de Mexico

    Google Scholar 

  8. Brock, W A. and Hommes, C.H. (1997). A rational route to randomness, Econometrica, 65, 1059–1095.

    Article  MATH  MathSciNet  Google Scholar 

  9. Brock, W.A, and Durlauf, S. (2001a). Interaction-based models. In: J. Heckman and E. Leamer (eds) Handbook of Econometrics, Vol V, North-Holland, Amsterdam.

    Google Scholar 

  10. Brock, W.A, and Durlauf, S. (2001b). Discrete choice with social interactions. Review of Economic Studies, 68, 235–260.

    Article  MATH  MathSciNet  Google Scholar 

  11. Brooks, C, and Katsaris, A. (2003). Rational speculative bubbles: an empirical investigation of the London stock exchange. Bulletin of Economic Research, 55, 319–346.

    Article  MathSciNet  Google Scholar 

  12. Chamley, C. (2002). Rational Herds. Cambridge, Cambridge University Press.

    Google Scholar 

  13. Cheung, Y-W., Chinn, M.D., and Pascual, A.G. (2002). Empirical exchange rate models in the nineties: Are they fit to Survive?, NBER Working Paper, 9393.

    Google Scholar 

  14. Chionis, D. and MacDonald, R. (2002). Aggregate and disaggregate measures of the Foreign Exchange risk premium. International Review of Economics and Finance, 11, 57–84.

    Article  Google Scholar 

  15. De Long, J. Bradford, Schleifer, A., Summers, L. H. and Waldmann, R. J. (1989). The size and incidence of the losses from noise trading. Journal of Finance, 44, 681–699.

    Article  Google Scholar 

  16. De Long, J. Bradford, Schleifer, A., Summers, L. H. and Waldmann, R. J. (1990). Noise trader risk in financial markets. Journal of Political Economy, 98, 703–738.

    Article  Google Scholar 

  17. Domowitz, Ian. (1993). A taxonomy of automated trade execution systems. Journal of International Money and Finance, 12, 607–631.

    Article  Google Scholar 

  18. Donaldson, R.G. and Kamstra, M. (1996). A new dividend procedure that rejects bubbles in asset prices: the case of the 1920’s stock crash. The Review of Financial Studies, 9, 333–383.

    Article  Google Scholar 

  19. Elster, Jon. (1989). Nuts and Bolts for the Social Sciences. New York: Cambridge University Press.

    Google Scholar 

  20. Flood, R.P., Garber, P.M., (1980). Market fundamentals versus price level bubbles: the first tests. Journal of Political Economy, 88, 74–97.

    Google Scholar 

  21. Flood, R.P. and Hodrick, R.J. (1990). On testing for speculative bubbles. Journal of Economic Perspectives, 4, 85–102.

    Google Scholar 

  22. Foellmer, H. and Schweizer, M. (1993). A microeconomic approach to diffusion models for stock prices. Mathematical Finance, 3, 1–23

    MATH  Google Scholar 

  23. Foellmer, H. Horst, U. and Kirman, A. (2005). Equilibrium in financial markets with heterogeneous agents: a new perspective. Journal of Mathematical Economics, 41, 123–155.

    Article  MATH  MathSciNet  Google Scholar 

  24. Frankel, J. A., and Froot, K. (1986). The dollar as an irrational speculative bubble: a tale of fundamentalists and chartists. The Marcus Wallenberg Papers on International Finance, 1, 27–55.

    Google Scholar 

  25. Frankel, J. A. and Rose, A. K. (1995). Empirical research on nominal exchange rates. In: G. M. Grossman and K. Rogoff (eds.) Handbook of International Economics, III, North Holland, Amsterdam.

    Google Scholar 

  26. Frederick, S., Loewenstein, G. and O’Donoghue, T. (2002). Time discounting and time preference: a critical review. Journal of Economic Literature, 40, 351–401.

    Article  Google Scholar 

  27. Garber P.M., (2000). Famous First Bubbles. M.I.T Press, Cambridge Mass.

    Google Scholar 

  28. Grandmont J.M. (1983). Money and value. Econometric Society Monographs, Cambridge University Press.

    Google Scholar 

  29. Horvàth, L. Kokoszka, P.S. and Teyssière, G. (2001). Empirical process of the squared residuals of an ARCH sequence. The Annals of Statistics, 29, 445–469.

    Article  MATH  MathSciNet  Google Scholar 

  30. Kirman, A. P. (1991). Epidemics of opinion and speculative bubbles in financial markets. In: M. Taylor (ed.), Money and Financial Markets, 354–68, Macmillan, London.

    Google Scholar 

  31. Kirman, A. (1993). Ants, rationality and recruitment. The Quarterly Journal of Economics, 108, 137–156.

    Article  Google Scholar 

  32. Kirman, A., Ricciotti, R. and Topol, R. (2006). Bubbles and foreign exchange markets: it takes two to tango. forthcoming Macroeconomic Dynamics.

    Google Scholar 

  33. Kirman, A. and Teyssière, G. (2002). Microeconomic models for long-memory in the volatility of financial series. Studies in Non-Linear Dynamics and Econometrics, 5, 281–303.

    Article  MATH  Google Scholar 

  34. Kirman, A. and Teyssière, G. (2005). Testing for bubbles and change-points. Journal of Economic dynamics and Control, 29, 765–799.

    Article  MathSciNet  Google Scholar 

  35. Kokoszka, P.S. and Leipus, R. (2000). Change-point estimation in ARCH models, Bernoulli, 6, 513–539.

    Article  MATH  MathSciNet  Google Scholar 

  36. Kokoszka, P. S. and Teyssière, G. (2005). Change point detection in GARCH models: asymptotic and bootstrap tests, Revised preprint, Université Paris 1.

    Google Scholar 

  37. Lo, A. (1991). Long term memory in stock market prices. Econometrica, 59, 1279–1313.

    Article  MATH  MathSciNet  Google Scholar 

  38. Lux, T. and Sornette, D. (2002). On rational speculative bubbles and fat tails. Journal of Money, Credit, and Banking, 34, 589–610.

    Google Scholar 

  39. McFadden, D., (1974). Conditional logit analysis of qualitative choice behaviour. In: Zarembka, P. (Ed.), Frontiers in Econometrics. New York: Academic Press

    Google Scholar 

  40. Meese, R.A. (1986). Testing for bubbles in exchange markets. Journal of Political Economy, 94, 345–373.

    Article  Google Scholar 

  41. Meese, R.A. and Rogoff, K. (1983). Empirical exchange rate models; do they fit out-of-sample? Journal of International Economics 14, 3–24.

    Article  Google Scholar 

  42. Shiller, R.J. (1981). Do stock prices move by too much to be justified by subsequent changes in dividends? American Economic Review, 71, 421–456.

    Google Scholar 

  43. Shiller, R. (2000). Irrational Exuberance. Princeton, Princeton University Press

    Google Scholar 

  44. Stiglitz, J.E. (1990). Symposium on bubbles. Journal of Economic Perspectives, 4, 13–18.

    Google Scholar 

  45. Teyssière, G. (2003). Interaction models for common long range dependence in asset price volatility. In: Rangarajan G, Ding M, (eds), Processes with Long Range Correlations: Theory and Applications Lecture Notes in Physics, 621, Springer Verlag, Berlin, pp. 231–269.

    Google Scholar 

  46. Tirole, J. (1985). Asset bubbles and overlapping generations. Econometrica, 53, 1490–1528.

    Google Scholar 

  47. Townsend, R.M. (1983). Forecasting the forecast of others. Journal of Political Economy, 91, 546–588.

    Article  Google Scholar 

  48. Vriend, N.J. (2000). An illustration of the essential difference between individual and social learning, and its consequences for computational analyses. Journal of Economic Dynamics and Control, 24, 1–19.

    Article  MATH  MathSciNet  Google Scholar 

  49. Weisbuch, G., Chenevez, O., Nadal, J-P. and Kirman, A.(1998). A formal approach to market organization: choice functions, mean field approximation and maximum entropy principle. In J. Lesourne and A. Orlean (eds.) Advances in Self-Organization and Evolutionary Economics. Economica pp.149–159.

    Google Scholar 

  50. Weisbuch, G., Kirman, A. and Herreiner, D. (2000). Market organisation and trading relationships. Economic Journal, 110, 411–436.

    Article  Google Scholar 

  51. West, K.D. (1988). Bubbles, fads and stock price volatility tests: a partial evaluation. Journal of Finance, 43, 639–656.

    Article  Google Scholar 

  52. Woo, W.T., (1987). Some evidence of speculative bubbles in the foreign exchange markets. Journal of Money, Credit and Banking, 19, 499–514

    Article  Google Scholar 

  53. Woodford, M. (1990). Learning to believe in sunspots. Econometrica, 58, 277–307.

    Article  MATH  MathSciNet  Google Scholar 

  54. Young, P. and Foster, D. (1991). Cooperation in the short and in the long run. Games and Economic Behavior, 3, 145–156.

    Article  MATH  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. School of Social Science, Institute for Advanced Study, USA

    Alan Kirman

Authors
  1. Alan Kirman
    View author publications

    You can also search for this author in PubMed Google Scholar

Editor information

Editors and Affiliations

  1. Laboratoire de Statistique Appliquée et de Modélisation Stochastique (SAMOS), Panthéon Sorbonne, Centre Pierre Mendès, Université Paris 1, 90 rue de Tolbiac, 75634, Paris Cedex 13, France

    Gilles Teyssière

  2. L’Ecole des Hautes Etudes en Sciences Sociales (EHESS), Université Aix-Marseille III, 2 rue de la Charité, 13002, Marseille, France

    Alan P. Kirman

Rights and permissions

Reprints and permissions

Copyright information

© 2007 Springer Berlin · Heidelberg

About this chapter

Cite this chapter

Kirman, A. (2007). The Microeconomic Foundations of Instability in Financial Markets. In: Teyssière, G., Kirman, A.P. (eds) Long Memory in Economics. Springer, Berlin, Heidelberg . https://doi.org/10.1007/978-3-540-34625-8_11

Download citation

Publish with us

Policies and ethics

Search

Navigation