TY - JOUR
T1 - Heterogeneous expectations in asset pricing
T2 - Empirical evidence from the S&P500
AU - Chiarella, Carl
AU - He, Xue Zhong
AU - Zwinkels, Remco C.J.
N1 - Funding Information:
The paper was initiated while Zwinkels was visiting the University of Technology, Sydney, whose hospitability he gratefully acknowledges. The authors wish to thank Ingolf Dittmann, Marno Verbeek, Bart Frijns, Philip Versijp, Gergana Jostova, participants of seminars at Erasmus University Rotterdam, Tinbergen Institute, University of Technology, Sydney, Auckland University of Technology, as well as participants of the 2009 meeting of the Society of Nonlinear Dynamics and Econometrics in Atlanta, the 2009 Workshop on Economic Heterogeneous Interacting Agents in Beijing, and the 2010 Eastern Finance Association. Chiarella and He acknowledge financial support of the ARC Discovery Project DP0773776. We thank the editor and two anonymous referees for highly useful feedback. The usual disclaimer applies.
PY - 2014/9
Y1 - 2014/9
N2 - This paper empirically assesses heterogeneous expectations in asset pricing. We use a maximum likelihood approach on S&P500 data to estimate a structural model. Our empirical results are consistent with a market populated with fundamentalists and chartists. In addition, agents switch between these groups conditional on their previous performance. The results imply that the model can explain the inflation and deflation of bubbles. Finally, the model is shown to be in the deterministically stable region, but produces stochastic bubbles of similar length and magnitude as empirically observed.
AB - This paper empirically assesses heterogeneous expectations in asset pricing. We use a maximum likelihood approach on S&P500 data to estimate a structural model. Our empirical results are consistent with a market populated with fundamentalists and chartists. In addition, agents switch between these groups conditional on their previous performance. The results imply that the model can explain the inflation and deflation of bubbles. Finally, the model is shown to be in the deterministically stable region, but produces stochastic bubbles of similar length and magnitude as empirically observed.
KW - Agent based models
KW - Asset pricing
KW - Fundamental analysis
KW - Momentum trading
KW - Technical analysis
UR - http://www.scopus.com/inward/record.url?scp=84900503360&partnerID=8YFLogxK
U2 - 10.1016/j.jebo.2014.03.003
DO - 10.1016/j.jebo.2014.03.003
M3 - Article
AN - SCOPUS:84900503360
SN - 0167-2681
VL - 105
SP - 1
EP - 16
JO - Journal of Economic Behavior and Organization
JF - Journal of Economic Behavior and Organization
ER -