Market Dynamics and Stock Price Volatility

This paper presents a possible explanation for some of the empirical properties of asset returns within a heterogeneous-agents framework. The model turns out, even if we assume the input fundamental value follows a simple Gaussian distribution lacking both fat tails and volatility dependence, these features can show up in the time series of asset returns. In this mode, the profit comparison and switching between heterogeneous agents play key roles through a focus on moving averages. This builds a connection between endogenous market performance and the emergence of stylized facts