On the Inception of Financial Representative Bubbles

Massimiliano Ferrara, Bruno A. Pansera and Francesco Strati
Additional contact information
Massimiliano Ferrara: Department of Law and Economics, University Mediterranea of Reggio Calabria, Via dei Bianchi 2, 89127 Reggio Calabria, Italy
Bruno A. Pansera: Department of Law and Economics, University Mediterranea of Reggio Calabria, Via dei Bianchi 2, 89127 Reggio Calabria, Italy
Francesco Strati: Department of Law and Economics, University Mediterranea of Reggio Calabria, Via dei Bianchi 2, 89127 Reggio Calabria, Italy

Mathematics, 2017, vol. 5, issue 4, 1-9

Abstract: In this work, we aim to formalize the inception of representative bubbles giving the condition under which they may arise. We will find that representative bubbles may start at any time, depending on the definition of a behavioral component. This result is at odds with the theory of classic rational bubbles, which are those models that rely on the fulfillment of the transversality condition by which a bubble in a financial asset can arise just at its first trade. This means that a classic rational bubble (differently from our model) cannot follow a cycle since if a bubble exists, it will burst by definition and never arise again.

Keywords: financial mathematics; financial bubbles; behavioral finance (search for similar items in EconPapers)
JEL-codes: C (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/2227-7390/5/4/64/pdf (application/pdf)
https://www.mdpi.com/2227-7390/5/4/64/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jmathe:v:5:y:2017:i:4:p:64-:d:119312

Access Statistics for this article

Mathematics is currently edited by Ms. Emma He

More articles in Mathematics from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().