Herd behavior and contagion in financial markets

Imitative behavior and contagion are well-documented regularities of financial markets. We study whether they can occur in a two-asset economy where rational agents trade sequentially. When traders have gains from trade, informational cascades arise and prices fail to aggregate information dispersed among traders. During a cascade all informed traders with the same preferences choose the same action, i.e., they herd. Moreover, herd behavior can generate financial contagion. Informational cascades and herds can spill over from one asset to the other, pushing the price of the other asset far from its fundamental value

Herd behavior in financial markets: an experiment with financial market professionals

We study herd behavior in a laboratory financial market with financial market professionals. An important novelty of the experimental design is the use of a strategy-like method. This allows us to detect herd behavior directly by observing subjects' decisions for all realizations of their private signal. In the paper, we compare two treatments: one in which the price adjusts to the order flow in such a way that herding should never occur, and one in which the presence of event uncertainty makes herding possible. In the first treatment, subjects seldom herd, in accordance with both the theory and previous experimental evidence on student subjects. A proportion of subjects, however, engage in contrarianism, something not accounted for by the theory. In the second treatment, the proportion of herding decisions increases, but not as much as the theory would suggest. Moreover, contrarianism disappears altogether. In both treatments, in contrast with what theory predicts, subjects sometimes prefer to abstain from trading, which affects the process of price discovery negatively

Herd behavior and contagion in financial markets

We study a sequential trading financial market where there are gains from trade, that is, where informed traders have heterogeneous private values. We show that an informational cascade (i.e., a complete blockage of information) arises and prices fail to aggregate information dispersed among traders. During an informational cascade, all traders with the same preferences choose the same action, following the market (herding) or going against it (contrarianism). We also study financial contagion by extending our model to a two-asset economy. We show that informational cascades in one market can be generated by informational spillovers from the other. Such spillovers have pathological consequences, generating long-lasting misalignments between prices and fundamentals

Herding and price convergence in a laboratory financial market

We study whether herding can arise in a laboratory financial market in which agents trade sequentially. Agents trade an asset whose value is unknown and whose price is efficiently set by a market maker. We show that the presence of a price mechanism destroys the possibility of herding. Most agents follow their private information and prices converge to the fundamental value. This result contrasts with the case of a fixed price, where herding and cascades arise. When the price moves, however, agents may behave as contrarian, i.e., they may trade against the market, something not accounted for by the theory. Finally, we study whether informational cascades arise when trade is costly (e.g, because of a Tobin tax). With trade costs, most subjects rationally decided not to trade and the price was unable to aggregate private information efficiently

Transaction costs and informational cascades in financial markets: theory and experimental evidence

We study the effect of transaction costs (e.g., a trading fee or a transaction tax, like the Tobin tax) on the aggregation of private information in financial markets. We analyze a financial market à la Glosten and Milgrom, in which informed and uninformed traders trade in sequence with a market maker. Traders have to pay a cost in order to trade. We show that, eventually, all informed traders decide not to trade, independently of their private information, i.e., an informational cascade occurs. We replicated our financial market in the laboratory. We found that, in the experiment, informational cascades occur when the theory suggests they should. Nevertheless, the ability of the price to aggregate private information is not significantly affected

Singularity theorems for warped products and the stability of spatial extra dimensions

New singularity theorems are derived for generic warped-product spacetimes of any dimension. The main purpose is to analyze the stability of (compact or large) extra dimensions against dynamical perturbations. To that end, the base of the warped product is assumed to be our visible 4-dimensional world, while the extra dimensions define the fibers, hence we consider "extra-dimensional evolution". Explicit conditions on the warping function that lead to geodesic incompleteness are given. These conditions can be appropriately rewritten, given a warping function, as restrictions on the intrinsic geometry of the fibers ---i.e. the extra dimensional space. To find the results, the conditions for parallel transportation in warped products in terms of their projections onto the base and the fibers have been solved, a result of independent mathematical interest that have been placed on an Appendix.Comment: 23 pages, 1 figure. References added, some small rewrittin

Spontaneous Magnetization through Non-Abelian Vortex Formation in Rotating Dense Quark Matter

When a color superconductor of high density QCD is rotating, superfluid vortices are inevitably created along the rotation axis. In the color-flavor locked phase realized at the asymptotically large chemical potential, there appear non-Abelian vortices carrying both circulations of superfluid and color magnetic fluxes. A family of solutions has a degeneracy characterized by the Nambu-Goldtone modes CP2, associated with the color-flavor locked symmetry spontaneously broken in the vicinity of the vortex. In this paper, we study electromagnetic coupling of the non-Abelian vortices and find that the degeneracy is removed with the induced effective potential. We obtain one stable vortex solution and a family of metastable vortex solutions, both of which carry ordinary magnetic fluxes in addition to color magnetic fluxes. We discuss quantum mechanical decay of the metastable vortices by quantum tunneling, and compare the effective potential with the other known potentials, the quantum mechanically induced potential and the potential induced by the strange quark mass.Comment: 24 pages, 4 figures; v2 revised published versio

Search for dark matter at LHC

The existence of dark matter in our universe is supported by many astrophysical observations and is one of the most compelling hints of new physics beyond the Standard Model, although there is not yet any direct evidence of darkmatter particles. The Large Hadron Collider (LHC) represents a powerful tool that can potentially discover dark matter through its direct production in proton-proton collisions. The aim of this article is to present the search for dark matter candidates in events with large missing transverse energy and one or more high energy jets collected with the CMS detector at LHC. Results obtained during Run1 with the 8TeV data and their interpretation are reported. In addition, prospects for the 13TeV analysis during Run2 and the discovery potential are also discussed