This paper considers the rational expectations model with multiplicative noise and input delay,where the system dynamics rely on the conditional expectations of future states.The main contribution is to obtain a suffi...This paper considers the rational expectations model with multiplicative noise and input delay,where the system dynamics rely on the conditional expectations of future states.The main contribution is to obtain a sufficient condition for the exact controllability of the rational expectations model.In particular,we derive a sufficient Gramian matrix condition and a rank condition for the delay-free case.The key is the solvability of the backward stochastic difference equations with input delay which is derived from the forward and backward stochastic system.展开更多
The primary goal of this paper is to price European options in the Merton＇s frame- work with underlying assets following jump-diffusion using fuzzy set theory. Owing to the vague fluctuation of the real financial mar...The primary goal of this paper is to price European options in the Merton＇s frame- work with underlying assets following jump-diffusion using fuzzy set theory. Owing to the vague fluctuation of the real financial market, the average jump rate and jump sizes cannot be recorded or collected accurately. So the main idea of this paper is to model the rate as a triangular fuzzy number and jump sizes as fuzzy random variables and use the property of fuzzy set to deduce two different jump-diffusion models underlying principle of rational expectations equilibrium price. Unlike many conventional models, the European option price will now turn into a fuzzy number. One of the major advantages of this model is that it allows investors to choose a reasonable European option price under an acceptable belief degree. The empirical results will serve as useful feedback information for improvements on the proposed model.展开更多
Human economic activities are inherently embedded in social networks.Nevertheless,whether social media information can affect short-term housing price changes,one of the most fundamental economic elements in modern ec...Human economic activities are inherently embedded in social networks.Nevertheless,whether social media information can affect short-term housing price changes,one of the most fundamental economic elements in modern economies,remains unclear.In this paper,we empirically investigate the effect of public expectations expressed on social media on the short-term housing price fluctuations of cities in China.The data were collected from Sina Weibo,one of the largest Twitter-like services in China.We first use a lexicon-based method to mine public expectations of housing price on Sina Weibo,and then use panel econometric models to empirically verify whether the public expectations on Sina Weibo can help more effectively explain short-term housing price changes of cities in China.Our results suggest that housing price expectations expressed on social media have a positive effect on housing price changes;that is,a 0.1 increase in bullish expectations on social media will result in a 0.2%increase in the housing price growth rate monthly but lagged by two months.The results are robust after additional tests.Our results are theoretically and empirically consistent with the findings of behavioural economics in emphasizing the importance of expectations and the failure of economic fundamentals in explaining the short-term changes of urban housing prices,which can not only shed light on the amplifying role of social media information on housing price changes,but also help investors use information technologies to assist their investment decision-makings.展开更多
This paper investigates the informational role of prices in segmented markets which are shocked by a kind of common sentiment resulting from financial contagion.This common sentiment bridges the connection between pri...This paper investigates the informational role of prices in segmented markets which are shocked by a kind of common sentiment resulting from financial contagion.This common sentiment bridges the connection between prices learned by rational traders and thus can weaken the uncertainty from noise shock.The authors find that there exist comovement effect and crowding-out effect in information acquisition among different markets.These two effects capture financial contagion when markets experience large downward or upward tendency,which offers an explanation for market crisis to some extent.展开更多
We present a parsimonious information acquisition model in which two types of traders can produce either fundamental or non-fundamental information.Fundamental information is related to asset liquidation value,whereas...We present a parsimonious information acquisition model in which two types of traders can produce either fundamental or non-fundamental information.Fundamental information is related to asset liquidation value,whereas non-fundamental information is related to the noise caused by traders'sentiment.Opening access to non-fundamental information increases the coordination possibilities among sentiment-informed traders and can yield two equilibrium-displaying properties:substitutability and complementarity.We find that the dominated mass of one type of informed trader can attenuate their information advantage,resulting in low ex ante expected utility associated with such traders.We further find that there is a crowding-out effect in information acquisition between the two types of informed traders,which offers some significant insights in explaining why bubbles burst when market sentiment is dominant.展开更多
Various information types and rational learning methods have shown that heterogeneous belief changes in a rational expectation model can explain many empirical findings in stock markets, such as momentum, contrarians,...Various information types and rational learning methods have shown that heterogeneous belief changes in a rational expectation model can explain many empirical findings in stock markets, such as momentum, contrarians, and technical trading. The methods have also shown that momentum and price movements can coexist in an asset market with only rational agents. The purpose of this paper is to provide a rational economic theory to explain these phenomena. Results of a dynamic programming model with heterogeneous beliefs show that the dynamic interactions between information diffusion and belief changes create continuation and reversals. The duration and magnitude of momentum and price movements are associated with trading volume. Therefore, rational investors should incorporate price and volume information in their trading decisions.展开更多
This paper presents a rational expectation equilibrium model to explore how the financial contagion occurs between the unlinked markets that do not share common fundamentals.In the proposed model,the authors assume tw...This paper presents a rational expectation equilibrium model to explore how the financial contagion occurs between the unlinked markets that do not share common fundamentals.In the proposed model,the authors assume two of the three risky assets share no common fundamental factors,but are connected by one intermediate asset via cross fundamentals.Through this channel,investors transmit fundamental risk from one asset to another by dint of the cross fundamentals.This mechanism causes liquidity comovement and subsequently becomes a source of market crisis:Through the contagion mechanism,an initial liquidity shock in one asset can result in a drop tendency in liquidity and price informativeness for another asset.Such comovement in liquidity offers a new explanation for idiosyncratic assets in financial contagion.展开更多
基金supported by the National Natural Science Foundation of China under Grants 61821004,62250056,62350710214,U23A20325,62350055the Natural Science Foundation of Shandong Province,China(ZR2021ZD14,ZR2021JQ24)+2 种基金High-level Talent Team Project of Qingdao West Coast New Area,China(RCTD-JC-2019-05)Key Research and Development Program of Shandong Province,China(2020CXGC01208)Science and Technology Project of Qingdao West Coast New Area,China(2019-32,2020-20,2020-1-4).
文摘This paper considers the rational expectations model with multiplicative noise and input delay,where the system dynamics rely on the conditional expectations of future states.The main contribution is to obtain a sufficient condition for the exact controllability of the rational expectations model.In particular,we derive a sufficient Gramian matrix condition and a rank condition for the delay-free case.The key is the solvability of the backward stochastic difference equations with input delay which is derived from the forward and backward stochastic system.
基金Supported by the Key Grant Project of Chinese Ministry of Education(309018)National Natural Science Foundation of China(70973104 and 11171304)the Zhejiang Natural Science Foundation of China(Y6110023)
文摘The primary goal of this paper is to price European options in the Merton＇s frame- work with underlying assets following jump-diffusion using fuzzy set theory. Owing to the vague fluctuation of the real financial market, the average jump rate and jump sizes cannot be recorded or collected accurately. So the main idea of this paper is to model the rate as a triangular fuzzy number and jump sizes as fuzzy random variables and use the property of fuzzy set to deduce two different jump-diffusion models underlying principle of rational expectations equilibrium price. Unlike many conventional models, the European option price will now turn into a fuzzy number. One of the major advantages of this model is that it allows investors to choose a reasonable European option price under an acceptable belief degree. The empirical results will serve as useful feedback information for improvements on the proposed model.
基金supported by National Natural Science Foundation of China under Grant Nos.72401027,72394374 and 72371257the Basic Scientific Research Fund of Central Universities under Grant No.YWF-23-JT-103China Postdoctoral Science Foundation under Grant Nos.GZC20230230 and 2024M750189.
文摘Human economic activities are inherently embedded in social networks.Nevertheless,whether social media information can affect short-term housing price changes,one of the most fundamental economic elements in modern economies,remains unclear.In this paper,we empirically investigate the effect of public expectations expressed on social media on the short-term housing price fluctuations of cities in China.The data were collected from Sina Weibo,one of the largest Twitter-like services in China.We first use a lexicon-based method to mine public expectations of housing price on Sina Weibo,and then use panel econometric models to empirically verify whether the public expectations on Sina Weibo can help more effectively explain short-term housing price changes of cities in China.Our results suggest that housing price expectations expressed on social media have a positive effect on housing price changes;that is,a 0.1 increase in bullish expectations on social media will result in a 0.2%increase in the housing price growth rate monthly but lagged by two months.The results are robust after additional tests.Our results are theoretically and empirically consistent with the findings of behavioural economics in emphasizing the importance of expectations and the failure of economic fundamentals in explaining the short-term changes of urban housing prices,which can not only shed light on the amplifying role of social media information on housing price changes,but also help investors use information technologies to assist their investment decision-makings.
基金supported by the National Natural Science Foundation of China under Grant No.71771008the Central University Fund under Grant No.PTRW1808+1 种基金the Fundamental Research Funds for the Central Universities under Grant No.XK1802-5the Supporting Plan for Top Talents in Humanities and Social Sciences under Grant No.YWF-19-BJ-W-45
文摘This paper investigates the informational role of prices in segmented markets which are shocked by a kind of common sentiment resulting from financial contagion.This common sentiment bridges the connection between prices learned by rational traders and thus can weaken the uncertainty from noise shock.The authors find that there exist comovement effect and crowding-out effect in information acquisition among different markets.These two effects capture financial contagion when markets experience large downward or upward tendency,which offers an explanation for market crisis to some extent.
基金National Natural Science Foundation of China(Grant No.71371023,No.71371024,No.71771008).
文摘We present a parsimonious information acquisition model in which two types of traders can produce either fundamental or non-fundamental information.Fundamental information is related to asset liquidation value,whereas non-fundamental information is related to the noise caused by traders'sentiment.Opening access to non-fundamental information increases the coordination possibilities among sentiment-informed traders and can yield two equilibrium-displaying properties:substitutability and complementarity.We find that the dominated mass of one type of informed trader can attenuate their information advantage,resulting in low ex ante expected utility associated with such traders.We further find that there is a crowding-out effect in information acquisition between the two types of informed traders,which offers some significant insights in explaining why bubbles burst when market sentiment is dominant.
文摘Various information types and rational learning methods have shown that heterogeneous belief changes in a rational expectation model can explain many empirical findings in stock markets, such as momentum, contrarians, and technical trading. The methods have also shown that momentum and price movements can coexist in an asset market with only rational agents. The purpose of this paper is to provide a rational economic theory to explain these phenomena. Results of a dynamic programming model with heterogeneous beliefs show that the dynamic interactions between information diffusion and belief changes create continuation and reversals. The duration and magnitude of momentum and price movements are associated with trading volume. Therefore, rational investors should incorporate price and volume information in their trading decisions.
基金supported by China Postdoctoral Science Foundation under Grant No.2019M660424the National Natural Science Foundation of China under Grant Nos.71771008 and 71803029Guangdong Province Philosophy and Social Science Planning Project under Grant No.GD21YYJ10。
文摘This paper presents a rational expectation equilibrium model to explore how the financial contagion occurs between the unlinked markets that do not share common fundamentals.In the proposed model,the authors assume two of the three risky assets share no common fundamental factors,but are connected by one intermediate asset via cross fundamentals.Through this channel,investors transmit fundamental risk from one asset to another by dint of the cross fundamentals.This mechanism causes liquidity comovement and subsequently becomes a source of market crisis:Through the contagion mechanism,an initial liquidity shock in one asset can result in a drop tendency in liquidity and price informativeness for another asset.Such comovement in liquidity offers a new explanation for idiosyncratic assets in financial contagion.
