How to grow a bubble: A model of myopic adapting agents

Spin models as microfoundation of macroscopic market models

“…We first analyze the dynamics of the model with a frozen coupling to the global magnetization of the system and find a phase transition between small and large magnetizations with a jump in volatility. Such a phase transition is found in other socio-economic models, as well [23]. Then we construct a macroscopic equation for the price, which includes a volatility switching due to the phase transition, reminiscent of regime switching models [9].…”