Stock Market Speculation: Spontaneous Symmetry Breaking of Economic Valuation

Firm foundation theory estimates a security's firm fundamental value based on four determinants: expected growth rate, expected dividend payout, the market interest rate and the degree of risk. In contrast, other views of decision-making in the stock market, using alternatives such as human psychology and behavior, bounded rationality, agent-based modeling and evolutionary game theory, expound that speculative and crowd behavior of investors may play a major role in shaping market prices. Here, we propose that the two views refer to two classes of companies connected through a ``phase transition''. Our theory is based on 1) the identification of the fundamental parity symmetry of prices ($p \to -p$), which results from the relative direction of payment flux compared to commodity flux and 2) the observation that a company's risk-adjusted growth rate discounted by the market interest rate behaves as a control parameter for the observable price. We find a critical value of this control parameter at which a spontaneous symmetry-breaking of prices occurs, leading to a spontaneous valuation in absence of earnings, similarly to the emergence of a spontaneous magnetization in Ising models in absence of a magnetic field. The low growth rate phase is described by the firm foundation theory while the large growth rate phase is the regime of speculation and crowd behavior. In practice, while large ``finite-time horizon'' effects round off the predicted singularities, our symmetry-breaking speculation theory accounts for the apparent over-pricing and the high volatility of fast growing companies on the stock markets.Comment: 23 pages, 10 figure

Analysis of the phenomenon of speculative trading in one of its basic manifestations: postage stamp bubbles

We document and analyze the empirical facts concerning one of the clearest evidence of speculation in financial trading as observed in the postage collection stamp market. We unravel some of the mechanisms of speculative behavior which emphasize the role of fancy and collective behavior. In our conclusion, we propose a classification of speculative markets based on two parameters, namely the amplitude of the price peak and a second parameter that measures its ``sharpness''. This study is offered to anchor modeling efforts to realistic market constraints and observations.Comment: 9 pages, 5 figures and 2 tables, in press in Int. J. Mod. Phys.

Analysis of the phenomenon of speculative trading in one of its basic manifestations: postage stamp bubbles

We document and analyze the empirical facts concerning one of the clearest evidence of speculation in financial trading as observed in the postage collection stamp market. We unravel some of the mechanisms of speculative behavior which emphasize the role of fancy and collective behavior. In our conclusion, we propose a classification of speculative markets based on two parameters, namely the amplitude of the price peak and a second parameter that measures its ``sharpness''. This study is offered to anchor modeling efforts to realistic market constraints and observations.Comment: 9 pages, 5 figures and 2 tables, in press in Int. J. Mod. Phys.

Models, Idols, and the Great White Whale: Toward a Christian Faith of Nonattachment

The juxtaposition of models of God and Christian faith may seem repugnant to many, as models are tentative and faith aims at an abiding certainty. In fact, for many Christians, using models of God in worship amounts to idolatry. By examining Biblical and extra-Biblical views of idolatry, I argue that models are not idols. To the contrary, the practice of God-modeling inoculates Christians against one of the most seductive idols of our age: the love of certainty. Furthermore, by examining meditations upon certainty in Melville’s Moby Dick and the early discourses of the Buddha, I suggest that overweening conviction is a vice that hinders rather than guarantees Christian discipleship, and that Christian faith is better defined as any or all of the following: relative confidence in propositions, faithful relationship, and a virtue of disciplined credulity

The Rise in House Prices in China: Bubbles or Fundamentals?

The dramatic rise of house prices in many cities of China has brought huge attention from both the governmental and academic circles. There is a huge debate on whether the increasing house prices are driven by market fundamentals or just by speculation. Like Levin and Wright (1997a, 1997b), we decompose house prices in China into fundamental and non-fundamental components. We also consider potential nonlinear feedback from the historical growth rate of house prices on the current house prices and propose a semiparametric approach to estimate the speculative components in the model. We demonstrate that the non-fundamental part contributes a relatively small proportion of the rise of house prices in China.

Uncertainty propagation and speculation in projective forecasts of environmental change: a lake-eutrophication example

The issue of whether models developed for current conditions can yield correct predictions when used under changed control, as is often the case in environmental management, is discussed. Two models of different complexity are compared on the basis of performance criteria, but it appears that good performance at the calibration stage does not guarantee correctly predicted behavior. A requirement for the detection of such a failure of the model is that the prediction uncertainty range is known. Two techniques to calculate uncertainty propagation are presented and compared: a stochastic first-order error propagation based on the extended Kalman filter (EKF), and a newly developed and robust Monte Carlo set-membership procedure (MCSM). The procedures are applied to a case study of water quality, generating a projective forecast of the algal dynamics in a lake (Lake Veluwe) in response to management actions that force the system into a different mode of behavior. It is found that the forecast from the more complex model falls within the prediction uncertainty range, but its informative value is low due to large uncertainty bounds. As a substitute for time-consuming revisions of the model, educated speculation about parameter shifts is offered as an alternative approach to account for expected but unmodelled changes in the system

Magnetic Modeling of the Diwak-Derekan Geothermal Area with Extension to Bawen, Central Java

In an effort to further advance understanding of Diwak-Derekan geothermal system, a second period of geomagnetic survey of the area including Kaliulo hot spring, Jatikurung hot spring and Kendalisodo geothermal hot spring has been carried out. The magnetic residual anomalies have been reproduced especially on the southern part of the study area. 3D magnetic analysis and interpretation of geological data acquired and collected in the field. Based on magnetic field anomaly and the field geological data, a speculation shows that magnetization intensity assumed for the existence of a cooling magma intrusion is suggested at the southern part of the study area, that is located at Sajen Village