Welcome to My Website!
Welcome to My Website!
Hello! My name is Fengyi Liu, currently a sophomore majoring in Economics in Tsinghua University. It is a great honor to participate in DIMACS REU 2025 and conduct my research under the guidance of Professor Jie Gao.
Name: Fengyi Liu
School: Tsinghua University
Major: Economics
E-mail: fl454@scarletmail.rutgers.edu
My research is on social networks and the formation of asset bubbles. Bubbles, in the context of economics and finance, appear when some assets’ price exceeds their fundamental value significantly and persistently. One of the most examples might be the Tulip Mania in 17th-century Holland, where a speculative frenzy took over and everyone poured their life savings into this flower convinced that prices will only go up.
Being an important and long-term harmful phenomenon, there are a lot of literature on it. The most popular one explained bubbles that, first people see prices rising and assume they will continue to rise, and investors become overly confident of the profit. As the narrative spreads, investors feel social pressure to join the crowd, ignoring their own private information and analysis.
Although this model is powerful, it has shortcomings. Because It tells you what happens , but not the precise mechanism of how this forms and moves. Also it does not differentiate between markets structures. So with my mentor’s advice, I bring in the Friedkin-Johnsen model, which is a good fit to study opinion dynamics. So in the first period, valuation of an asset by an agent in a market, is entirely determined by a set of exogenous variables. After that, valuation is still affected by exogenous factors but also endogenously by their own and others’ opinions.In summary, it models the formation process as a weighted average of these two things.
My work will mainly focus on how to explain the formation process of bubbles with the model and to test some hypothesis about the community structure of markets.