Contagious popular stories, stock market participation, and boom–bust cycles

Sarah Mignot and Frank Westerhoff

Mathematics and Computers in Simulation (MATCOM), 2025, vol. 234, issue C, 459-471

Abstract: We study a model in which investors’ stock market participation hinges on contagious popular stories. Two opposing narratives exist that either advocate investing in the stock market or abstaining from it. Investors’ adherence to these narratives depends on the current behavior of the stock market and the social interactions among investors. For instance, stories that advocate investing in the stock market appear more plausible to investors during boom periods and when such behavior is common among peers. We identify different constellations in which waves of market entry and exit, driven by contagious popular stories, create boom–bust stock market dynamics.

Keywords: Stock market participation; Contagious popular stories; Social interactions; Boom–bust dynamics; Stability and bifurcation analysis (search for similar items in EconPapers)
JEL-codes: D84 G12 G41 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:matcom:v:234:y:2025:i:c:p:459-471

DOI: 10.1016/j.matcom.2025.03.014

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