Financial ``Anti-Bubbles'': Log-Periodicity in Gold and Nikkei collapses

We propose that imitation between traders and their herding behaviour not only lead to speculative bubbles with accelerating over-valuations of financial markets possibly followed by crashes, but also to ``anti-bubbles'' with decelerating market devaluations following all-time highs. For this, we propose a simple market dynamics model in which the demand decreases slowly with barriers that progressively quench in, leading to a power law decay of the market price decorated by decelerating log-periodic oscillations. We document this behaviour on the Japanese Nikkei stock index from 1990 to present and on the Gold future prices after 1980, both after their all-time highs. We perform simultaneously a parametric and non-parametric analysis that are fully consistent with each other. We extend the parametric approach to the next order of perturbation, comparing the log-periodic fits with one, two and three log-frequencies, the latter one providing a prediction for the general trend in the coming years. The non-parametric power spectrum analysis shows the existence of log-periodicity with high statistical significance, with a prefered scale ratio of $\lambda \approx 3.5$ for the Nikkei index $\lambda \approx 1.9$ for the Gold future prices, comparable to the values obtained for speculative bubbles leading to crashes.Comment: 14 pages with 4 figure

Noise-induced volatility of collective dynamics

"Noise-induced volatility" refers to a phenomenon of increased level of fluctuations in the collective dynamics of bistable units in the presence of a rapidly varying external signal, and intermediate noise levels. The archetypical signature of this phenomenon is that --beyond the increase in the level of fluctuations-- the response of the system becomes uncorrelated with the external driving force, making it different from stochastic resonance. Numerical simulations and an analytical theory of a stochastic dynamical version of the Ising model on regular and random networks demonstrate the ubiquity and robustness of this phenomenon, which is argued to be a possible cause of excess volatility in financial markets, of enhanced effective temperatures in a variety of out-of-equilibrium systems and of strong selective responses of immune systems of complex biological organisms. Extensive numerical simulations are compared with a mean-field theory for different network topologies

Testing for rational speculative bubbles in the Brazilian residential real-estate market

Speculative bubbles have been occurring periodically in local or global real estate markets and are considered a potential cause of economic crises. In this context, the detection of explosive behaviors in the financial market and the implementation of early warning diagnosis tests are of critical importance. The recent increase in Brazilian housing prices has risen concerns that the Brazilian economy may have a speculative housing bubble. In the present paper, we employ a recently proposed recursive unit root test in order to identify possible speculative bubbles in data from the Brazilian residential real-estate market. The empirical results show evidence for speculative price bubbles both in Rio de Janeiro and Sao Paulo, the two main Brazilian cities

Constituting monetary conservatives via the 'savings habit': New Labour and the British housing market bubble

The ongoing world credit crunch might well kill off the most recent bubble dynamics in the British housing market by driving prices systematically downwards from their 2007 peak. Nonetheless, the experience of that bubble still warrants analytical attention. The Labour Government might not have been responsible for consciously creating it, but it has certainly grasped the opportunities the bubble has provided in an attempt to enforce a process of agential change at the heart of the British economy. The key issue in this respect is the way in which the Government has challenged the legitimacy of passive welfare receipts in favour of establishing a welfare system based on incorporating the individual into an active asset-holding society. The housing market has taken on new political significance as a means for individuals first to acquire assets and then to accumulate wealth on the back of asset ownership. The ensuing integration of the housing market into an increasingly reconfigured welfare system has permeated into the politics of everyday life. It has been consistent with individuals remaking their political subjectivities in line with preferences for the type of conservative monetary policies that typically keep house price bubbles inflated

Value at Risk models with long memory features and their economic performance

We study alternative dynamics for Value at Risk (VaR) that incorporate a slow moving component and information on recent aggregate returns in established quantile (auto) regression models. These models are compared on their economic performance, and also on metrics of first-order importance such as violation ratios. By better economic performance, we mean that changes in the VaR forecasts should have a lower variance to reduce transaction costs and should lead to lower exceedance sizes without raising the average level of the VaR. We find that, in combination with a targeted estimation strategy, our proposed models lead to improved performance in both statistical and economic terms

House price Keynesianism and the contradictions of the modern investor subject

This article conceptualises the marked downturn in UK house prices in the 2007-2009 period in relation to longer-term processes of national economic restructuring centred on a new model of homeownership. The structure of UK house prices has been impacted markedly by the Labour Government‟s efforts to ingrain a particular notion of financial literacy amid the move towards an increasingly asset-based system of welfare. New model welfare recipients and new model homeowners have thereby been co-constituted in a manner consistent with a new UK growth regime of „house price Keynesianism‟. However, the investor subjects who drive such growth are necessarily rendered uncertain as compared with the idealised image of Government policy because of their reliance on the credit-creating decisions of private financial institutions. The recent steep decline in UK house prices is explained here as an epiphenomenon of the disruptive effect on the idealised image caused by the dependence of investor subjects on pricing dynamics not of their making

Sand in the wheels, or oiling the wheels, of international finance? : New Labour's appeal to a 'new Bretton Woods'

Tony Blair’s political instinct typically is to associate himself only with the future. As such, his explicit appeal to ‘the past’ in his references to New Labour’s desire to establish a “new Bretton Woods” is sufficient in itself to arouse some degree of analytical curiosity (see Blair 1998a). The fact that this appeal was made specifically in relation to Bretton Woods is even more interesting. The resonant image of the international economic context established by the original Bretton Woods agreements invokes a style and content of policy-making which Tony Blair typically dismisses as neither economically nor politically consistent with his preferred vision of the future (see Blair 2000c, 2001b)

Theory of Fano-Kondo effect of transport properties through quantum dots

The Fano-Kondo effect in zero-bias conductance is investigated based on a theoretical model for the T-shaped quantum dot. The conductance as a function of the gate voltage is generally characterized by a Fano asymmetric parameter q. With varying temperature the conductance shows a crossover between the high and low temperature regions compared with the Kondo temperature T_K: two Fano asymmetric peaks at high temperatures and the Fano-Kondo plateau inside a Fano peak at low temperatures. Temperature dependence of conductance is calculated numerically by the Finite temperature density matrix renormalization group method (FT-DMRG).Comment: 8 pages, 7 figure

The long-run performance of IPOs: the case of the Stock Exchange of Mauritius

This study examines the long-run performance of initial public offerings on the Stock Exchange of Mauritius (SEM). The results show that the 3-year equally weighted cumulative adjusted returns average −16.5%. The magnitude of this underperformance is consistent with most reported studies in different developed and emerging markets. Based on multivariate regression models, firms with small issues and higher ex ante financial strength seem on average to experience greater long-run underperformance, supporting the divergence of opinion and overreaction hypotheses. On the other hand, Mauritian firms do not on average time their offerings to lower cost of capital and as such, there seems to be limited support for the windows of opportunity hypothesis

The Promise of Prediction Markets

Prediction markets are markets for contracts that yield payments based on the outcome of an uncertain future event, such as a presidential election. Using these markets as forecasting tools could substantially improve decision making in the private and public sectors. We argue that U.S. regulators should lower barriers to the creation and design of prediction markets by creating a safe harbor for certain types of small stakes markets. We believe our proposed change has the potential to stimulate innovation in the design and use of prediction markets throughout the economy, and in the process to provide information that will benefit the private sector and government alike.Technology and Industry