Multi-asset bubbles equilibrium price dynamics

Francesco Cordoni

The North American Journal of Economics and Finance, 2025, vol. 75, issue PA

Abstract: The price-bubble and crash formation process is theoretically investigated in a two-asset equilibrium model. Sufficient and necessary conditions are derived for the existence of average equilibrium price dynamics of different agent-based models, where agents are distinguished in terms of factor and investment trading strategies. In line with experimental results, we show that assets with a positive average dividend, i.e., with a strictly declining fundamental value, display at the equilibrium price the typical hump-shaped bubble observed in experimental asset markets. Moreover, a misvaluation effect is observed in the asset with a constant fundamental value, triggered by the other asset that displays the price bubble shape when a sharp price decline is exhibited at the end of the market.

Keywords: Bubbles; Agent-based models; Experimental economics; Equilibrium dynamics; Multi-asset market (search for similar items in EconPapers)
JEL-codes: C62 C90 D40 G14 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:75:y:2025:i:pa:s1062940824002067

DOI: 10.1016/j.najef.2024.102281

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