Agent-based model predicts financial market bubbles and crashes with accuracy.
A simple model was created to study how financial markets behave. The model looked at two types of agents: some who follow trends and others who focus on the value of assets. When trend-followers dominate, we see bubbles and crashes. But when value-focused agents are in charge, the market is more stable. The model showed that market behavior can be unpredictable and change suddenly, especially when there are a specific number of agents involved. This unpredictability is linked to a threshold that determines when agents start affecting prices. The model's findings suggest that this kind of behavior can happen in real markets too.