---
_id: '49309'
abstract:
- lang: eng
  text: I study the effect of heterogeneous beliefs about asset prices on the long-term
    behavior of financial markets. Starting from the ideas of Abreu and Brunnermeier
    (Citation2003), a two-dimensional system of differential equations is developed.
    The first dynamic variable is the asset price growth rate. The second dynamic
    variable is the number of investors who believe that asset prices are abnormally
    high. In a phase plane analysis, I find both stable and unstable equilibria, depending
    on the spread of information and the response to other agents’ beliefs. If individuals
    try to increase their returns while perceiving more overpricing, these equilibria
    can be spirals or even approach limit cycles. Although I intend to study general
    price patterns, abnormally high asset prices can be caused by financial bubbles.
    In this model, bubbles can emerge and deflate both in cycles or directly, or they
    can grow until they burst. Further, I analyze market behavior after a central
    bank increases the interest rate. This can lead to new stable equilibria, but
    the emergence and bursting of bubbles cannot be prevented.
author:
- first_name: Carina
  full_name: Burs, Carina
  last_name: Burs
citation:
  ama: Burs C. A model of cycles and bubbles under heterogeneous beliefs in financial
    markets. <i>Cogent Economics &#38; Finance</i>. 2023;11(2). doi:<a href="https://doi.org/10.1080/23322039.2023.2272485">10.1080/23322039.2023.2272485</a>
  apa: Burs, C. (2023). A model of cycles and bubbles under heterogeneous beliefs
    in financial markets. <i>Cogent Economics &#38; Finance</i>, <i>11</i>(2). <a
    href="https://doi.org/10.1080/23322039.2023.2272485">https://doi.org/10.1080/23322039.2023.2272485</a>
  bibtex: '@article{Burs_2023, title={A model of cycles and bubbles under heterogeneous
    beliefs in financial markets}, volume={11}, DOI={<a href="https://doi.org/10.1080/23322039.2023.2272485">10.1080/23322039.2023.2272485</a>},
    number={2}, journal={Cogent Economics &#38; Finance}, publisher={Informa UK Limited},
    author={Burs, Carina}, year={2023} }'
  chicago: Burs, Carina. “A Model of Cycles and Bubbles under Heterogeneous Beliefs
    in Financial Markets.” <i>Cogent Economics &#38; Finance</i> 11, no. 2 (2023).
    <a href="https://doi.org/10.1080/23322039.2023.2272485">https://doi.org/10.1080/23322039.2023.2272485</a>.
  ieee: 'C. Burs, “A model of cycles and bubbles under heterogeneous beliefs in financial
    markets,” <i>Cogent Economics &#38; Finance</i>, vol. 11, no. 2, 2023, doi: <a
    href="https://doi.org/10.1080/23322039.2023.2272485">10.1080/23322039.2023.2272485</a>.'
  mla: Burs, Carina. “A Model of Cycles and Bubbles under Heterogeneous Beliefs in
    Financial Markets.” <i>Cogent Economics &#38; Finance</i>, vol. 11, no. 2, Informa
    UK Limited, 2023, doi:<a href="https://doi.org/10.1080/23322039.2023.2272485">10.1080/23322039.2023.2272485</a>.
  short: C. Burs, Cogent Economics &#38; Finance 11 (2023).
date_created: 2023-11-28T14:31:12Z
date_updated: 2023-11-28T14:34:50Z
department:
- _id: '202'
doi: 10.1080/23322039.2023.2272485
intvolume: '        11'
issue: '2'
jel:
- E44
- E58
- D83
- C62
- G12
keyword:
- asset pricing
- subjective information
- stability conditions
- monetary policy
- risk aversion
language:
- iso: eng
publication: Cogent Economics & Finance
publication_identifier:
  issn:
  - 2332-2039
publication_status: published
publisher: Informa UK Limited
status: public
title: A model of cycles and bubbles under heterogeneous beliefs in financial markets
type: journal_article
user_id: '44010'
volume: 11
year: '2023'
...