Statistical properties of a heterogeneous asset pricing model with time-varying second moment

Carl Chiarella*, Xue Zhong He, Duo Wang

*Corresponding author for this work

Research output: Chapter in Book or Report/Conference proceedingConference Proceedingpeer-review

1 Citation (Scopus)


Stability and bifurcation analysis of deterministic systems has been widely used in modeling financial markets. However, the impact of such dynamic phenomena on various statistical properties of the corresponding stochastic model, including skewness and excess kurtosis, various autocorrelation (AC) patterns of under and over reactions, and volatility clustering characterised by the long-range dependence of ACs, is not clear and has been very little studied. This paper aims to contribute to this issue. Through a simple behavioural asset pricing model with fundamentalists and chartists, we examine the statistical properties of the model and their connection to the dynamics of the underlying deterministic model. In particular, our analysis leads to some insights into various mechanisms that may generate some of the stylised facts, such as fat tails, skewness, high kurtosis and long memory, observed in high frequency financial data.

Original languageEnglish
Title of host publicationThe Complex Networks of Economic Interactions
Subtitle of host publicationEssays in Agent-Based Economics and Econophysics
EditorsAkira Namatame, Taisie Kaizouji, Yuuji Aruka
Number of pages16
Publication statusPublished - 2006
Externally publishedYes

Publication series

NameLecture Notes in Economics and Mathematical Systems
ISSN (Print)0075-8442


  • Bifurcation
  • Chartists
  • Fundamentalists
  • Investors' under-and over-reactions
  • Stability
  • Stylized facts


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