The aim of this paper is to show, within the mean-variance framework, how the market belief can be constructed as the result of the aggregation of heterogeneous beliefs and how the market equilibrium prices of risky assets can thus be determined. The heterogeneous beliefs are defined in terms of...

Long-range dependence in volatility is one of the most prominent examples of applications in financial market research involving universal power laws. Its characterization has recently spurred attempts at theoretical explanation of the underlying mechanism. This paper contributes to this recent...

The methods of various moving average rules remain popular with financial market practitioners. These rules have recently become the focus of empirical studies. However there seem to have been very few studies on the analysis of the type of financial market dynamics resulting from the fact that...

Following the concept of "adaptively rational equilibrium", Brock and Hommes establish a simple present discounted value asset-pricing model with heterogeneous beliefs. Agents adapt their beliefs over time by choosing from different predictors or expectations functions, based upon their past...

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We reconsider the derivation of the traditional capital asset pricing model (CAPM) in the discrete time setting for a portfolio of one riskless asset and many risky assets. In contrast to the standard setting, it is assumed that agents are heterogeneous in their conditional means and covariances...