Agent-based model predicts financial market bubbles and crashes with accuracy.
A simple model was created to study how financial markets behave. The model has two types of agents: some follow trends, causing instability, while others stabilize the market. Bubbles and crashes happen when trend-followers dominate. The model shows that market behavior can be unpredictable and intermittent, depending on the number of agents involved. This unpredictability is linked to a threshold that determines when agents act. The model's findings suggest that market behavior can self-organize into patterns, influenced by the interaction between prices and the number of active agents.