Tad Hogg, Bernardo A. Huberman and Michael Youssefmir
Recent developments in the global liberalization of equity and currency
markets, coupled to advances in trading technologies, are making markets
increasingly interdependent. This increased fluidity raises questions
about the stability of the international financial system. In this
paper, we show that as couplings between stable markets grow, the
likelihood of instabilities is increased, leading to a loss of general
equilibrium as the system becomes increasingly large and diverse.