Download or read book Heterogeneous Expectations in Asset Pricing written by Carl Chiarella and published by . This book was released on 2016 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper empirically estimates a heterogeneous agents model using S&P 500 data. While previous studies on heterogeneous agents models typically resort to simulation techniques, our empirical results indicate that the market is populated with fundamentalists, chartists, and noise traders. In addition, agents switch between these groups conditional on their previous performance. As a result, the model is capable of explaining the inflation and deflation of bubbles. Finally, it is reported that the model can explain the stylized facts of financial market such as heavy tails and volatility clustering.

Download or read book Capital Asset Pricing Under Heterogeneous Expectations and the Importance of Restrictions on Short Sales written by Stephen Figlewski and published by . This book was released on 1979 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Diverse Risk Preferences and Heterogeneous Expectations in an Asset Pricing Model written by Thomas Gomez and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose a heuristic switching model of an asset market where the agents' choice of heuristic is consistent with their individual risk aversion. They choose between a fundamentalist and a trend-following rule to form expectations about the price of a risky asset. Given their risk aversion, agents make a deterministic trade-off between mean and variance both in choosing a forecasting heuristic and determining the number of risky assets to buy. Heterogeneous risk preferences can lead to diverse choices of heuristic. Using empirical estimates for the distribution of risk aversion, simulations show that the resulting time-varying heterogeneity of expectations can give rise to chaotic dynamics: irregular booms and busts in the asset price without exogenous shocks. Small, stochastic price shocks lead to larger asset price bubbles, and can make stable solutions explosive. We prove that a representative agent cannot capture our model.

Download or read book Capital Asset Pricing Under Heterogeneous Expectations and the Important sic of Restrictions on Short Sales written by Stephen Figlewski and published by . This book was released on 1979 with total page 70 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Heterogeneous Expectations and Asset Price Dynamics written by Noemi Schmitt and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Asset Price and Wealth Dynamics with Heterogeneous Expectations written by Florian Heitger and published by . This book was released on 2010 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Based on a classical financial market model different model variants known from the literature are discussed and analyzed, each focussing on modeling financial markets as a nonlinear dynamic system by introducing the formation of (heterogeneous) beliefs about future asset prices into the model framework. Furthermore, a market model under a market maker scenario is proposed which brings these types of financial market models to a more consistent and more realistic model structure. The proposed market model explicitly takes into account the risky-asset supply side. This extension in the model structure allows to model the risk premium demanded by the market participants for taking market risk, which appears to be endogenously driven by the market over time. The resulting dynamics of asset price and agents' wealth is analyzed within a chartist-fundamentalist framework. Within this model framework it becomes possible to characterize the market equilibria and the other kinds of asymptotic behavior in terms of the long-run evolution of wealth proportions and risky-asset returns. Moreover it is shown to which extent those heterogeneous expectations in the agent-based market model can explain observed fluctuations in real financial markets and lead to the emergence of complicated dynamics of growing asset price paths.

Download or read book Expectation Formation in Financial Markets written by Bart Frijns and published by . This book was released on 2019 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: We set up an endowment based asset pricing model in which agents have heterogeneous expectations about the future price level. Expectations are a function of fundamentals, trends, and sentiment. Agents are allowed to switch between expectation formation functions based on past performance as well as sentiment. Estimation results on the S&P500 reveal that there is heterogeneity between agents, with substantial switching between groups. We find that sentiment has a direct effect on expectations. Specifically, heterogeneity is increasing in sentiment, and sentiment reduces the frequency of switching between functions.

Download or read book Behavioral Rationality and Heterogeneous Expectations in Complex Economic Systems written by Cars Hommes and published by Cambridge University Press. This book was released on 2013-01-24 with total page 273 pages. Available in PDF, EPUB and Kindle. Book excerpt: Recognising that the economy is a complex system with boundedly rational interacting agents, applies complexity modelling to economics and finance.

Download or read book A theory of asset pricing based on heterogeneous information written by Elias Albagli and published by . This book was released on 2011 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: We propose a theory of asset prices that emphasizes heterogeneous information as the main element determining prices of different securities. Our main analytical innovation is in formulating a model of noisy information aggregation through asset prices, which is parsimonious and tractable, yet flexible in the specification of cash flow risks. We show that the noisy aggregation of heterogeneous investor beliefs drives a systematic wedge between the impact of fundamentals on an asset price, and the corresponding impact on cash flow expectations. The key intuition behind the wedge is that the identity of the marginal trader has to shift for different realization of the underlying shocks to satisfy the market-clearing condition. This identity shift amplifies the impact of price on the marginal trader's expectations. We derive tight characterization for both the conditional and the unconditional expected wedges. Our first main theorem shows how the sign of the expected wedge (that is, the difference between the expected price and the dividends) depends on the shape of the dividend payoff function and on the degree of informational frictions. Our second main theorem provides conditions under which the variability of prices exceeds the variability for realized dividends. We conclude with two applications of our theory. First, we highlight how heterogeneous information can lead to systematic departures from the Modigliani-Miller theorem. Second, in a dynamic extension of our model we provide conditions under which bubbles arise.

Download or read book Contrarian Behavior Information Networks and Heterogeneous Expectations in an Asset Pricing Market written by Tomasz Makarewicz and published by . This book was released on 2016 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper studies the emergence of contrarian behavior in information networks in an asset pricing market. Financial traders coordinate on similar behavior, but have heterogeneous price expectations and are influenced by friends. According to a popular belief, they are prone to herding. However, in laboratory experiments subjects use contrarian strategies. Theoretical literature on learning in networks is scarce and cannot explain this conundrum (Gerasymchuk et al., 2013).The paper follows Anufriev et al. (2014) and investigates an agent-based model, in which agents forecast price with a simple general heuristic: adaptive and trend extrapolation expectations, with an additional term of (dis-)trust towards their friends' mood. Agents independently use Genetic Algorithms to optimize the parameters of the heuristic. The paper considers friendship networks of symmetric (regular lattice, fully connected) and asymmetric architecture (random, rewired, star).The main finding is that the agents learn contrarian strategies, which amplifies market turn-overs and hence price oscillations. Nevertheless, agents learn similar behavior and their forecasts remain well coordinated. The model therefore offers a natural interpretation for the difference between the experimental stylized facts and market surveys.

Download or read book Heterogeneous Expectations and Equilibrium Price of a Risky Asset written by Yoon Dokko and published by . This book was released on 1984 with total page 8 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book A Behavioral Approach to Asset Pricing written by Hersh Shefrin and published by Elsevier. This book was released on 2008-05-19 with total page 636 pages. Available in PDF, EPUB and Kindle. Book excerpt: Behavioral finance is the study of how psychology affects financial decision making and financial markets. It is increasingly becoming the common way of understanding investor behavior and stock market activity. Incorporating the latest research and theory, Shefrin offers both a strong theory and efficient empirical tools that address derivatives, fixed income securities, mean-variance efficient portfolios, and the market portfolio. The book provides a series of examples to illustrate the theory. The second edition continues the tradition of the first edition by being the one and only book to focus completely on how behavioral finance principles affect asset pricing, now with its theory deepened and enriched by a plethora of research since the first edition

Download or read book Asset Price and Wealth Dynamics Under Heterogeneous Expectations written by Carl Chiarella and published by . This book was released on 2001 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Noncausality and Asset Pricing written by Matthijs Lof and published by . This book was released on 2014 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: Misspecification of agents' information sets or expectation formation mechanisms may lead to noncausal autoregressive representations of asset prices. Annual US stock prices are found to be noncausal, implying that agents' expectations are not revealed to an outside observer such as an econometrician observing only realized market data. A simulation study shows that noncausal processes can be generated by asset-pricing models featuring heterogeneous expectations.

Download or read book Asset Pricing in a Lucas Framework with Boundedly Rational Heterogeneous Agents written by Andrew James Culham and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: ABSTRACT: The standard dynamic general equilibrium model of financial markets does a poor job of explaining the empirical facts observed in real market data. The common assumptions of homogeneous investors and rational expectations equilibrium are thought to be major factors leading to this poor performance. In an attempt to relax these assumptions, the literature has seen the emergence of agent-based computational models where artificial economies are populated with agents who trade in stylized asset markets. Although they offer a great deal of flexibility, the theoretical community has often criticized these agent-based models because the agents are too limited in their analytical abilities.

Download or read book Computational Economics Heterogeneous Agent Modeling written by Cars Hommes and published by Elsevier. This book was released on 2018-06-27 with total page 836 pages. Available in PDF, EPUB and Kindle. Book excerpt: Handbook of Computational Economics: Heterogeneous Agent Modeling, Volume Four, focuses on heterogeneous agent models, emphasizing recent advances in macroeconomics (including DSGE), finance, empirical validation and experiments, networks and related applications. Capturing the advances made since the publication of Volume Two (Tesfatsion & Judd, 2006), it provides high-level literature with sections devoted to Macroeconomics, Finance, Empirical Validation and Experiments, Networks, and other applications, including Innovation Diffusion in Heterogeneous Populations, Market Design and Electricity Markets, and a final section on Perspectives on Heterogeneity. Helps readers fully understand the dynamic properties of realistically rendered economic systems Emphasizes detailed specifications of structural conditions, institutional arrangements and behavioral dispositions Provides broad assessments that can lead researchers to recognize new synergies and opportunities

Download or read book Handbook on Systemic Risk written by Jean-Pierre Fouque and published by Cambridge University Press. This book was released on 2013-05-23 with total page 993 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Handbook on Systemic Risk, written by experts in the field, provides researchers with an introduction to the multifaceted aspects of systemic risks facing the global financial markets. The Handbook explores the multidisciplinary approaches to analyzing this risk, the data requirements for further research, and the recommendations being made to avert financial crisis. The Handbook is designed to encourage new researchers to investigate a topic with immense societal implications as well as to provide, for those already actively involved within their own academic discipline, an introduction to the research being undertaken in other disciplines. Each chapter in the Handbook will provide researchers with a superior introduction to the field and with references to more advanced research articles. It is the hope of the editors that this Handbook will stimulate greater interdisciplinary academic research on the critically important topic of systemic risk in the global financial markets.