A Nash equilibrium solution for stock market crashes.

Title: A Nash equilibrium solution for stock market crashes.
Identifier: AAI9807898
identifier: 9807898
Creator: Aksoy, Levent.
Contributor: Adviser: Salih N. Neftci
Date: 1997
Language: English
Publisher: City University of New York.
Subject: Economics, Finance
Abstract: Throughout history, large, unsubstantiated movements in asset prices have long puzzled researchers. Irrational human behaviour is blamed for the cause of such speculative bubbles and market crashes. This thesis investigates a possible underlying rationality that might trigger such changes.;There are two main sections: In the first section a game theoretical model of market is proposed. If the decision to buy or sell an asset is based on expectations of other players' decision, then, a state where all participants buy or sell at the same time can be in a Nash equilibrium. A sudden change in the players' strategies may cause a bubble as well as a market crash.;In the second part, computer simulations based on adaptive expectations are performed to support the theory. Indeed, if the right kind of conditions are met, one can observe bursts of trading activity. These periods of activity as they start, may suddenly disappear.
Type: dissertation
Source: PQT Legacy CUNY.xlsx
degree: Ph.D.