https://doi.org/10.1007/s100510050144
Speculative trading: the price multiplier effect
L.P.T.H.E., Université Paris 7, Tour 24, 2 place Jussieu, 75251 Paris
Cedex 5, France
Received:
29
September
1999
Published online: 15 March 2000
During a speculative episode the price of an item jumps
from an initial level 
to a peak level 
before more or less
returning to level .
The ratio 
is referred to as the amplitude A of the peak.
This paper shows that for a given market the peak amplitude is a linear function
of the logarithm of the price at the beginning of the speculative
episode; with expressed in 1999 euros the relationship takes the form:
; the values of the parameter a turn out to
be relatively
independent of the market considered: 
, the values of the
parameter b are more market-dependent, but are stable in the course of time
for a given market.
This relationship
suggests that the higher the stakes the more "bullish"the market becomes.
Possible mechanisms of this "risk affinity"effect are discussed.
PACS: 64.60.Fr – Equilibrium properties near critical points, critical exponents / 87.23.Ge – Dynamics of social systems
© EDP Sciences, Società Italiana di Fisica, Springer-Verlag, 2000
