This paper considers a simple Continuous Beliefs System (CBS) toinvestigate the effects on price dynamics of several behavioralassumptions: (i) herd behaviour; (ii) a-synchronous updating ofbeliefs; and (iii) heterogeneity in time horizons (memory) amongagents. The recently introduced concept of...

We develop a new model for the multivariate covariance matrix dynamics based on daily return observations and daily realized covariance matrix kernels based on intraday data. Both types of data may be fat-tailed. We account for this by assuming a matrix-F distribution for the realized kernels,...

An expected utility based cost-benefit analysis is in general fragile to its distributional assumptions. We derive necessary and sufficient conditions on the utility function of the expected utility model to avoid this. The conditions ensure that expected (marginal) utility remains finite also...

We propose a new score-driven model to capture the time-varying volatility and tail behavior of realized kernels. We assume realized kernels follow an F distribution with two time-varying degrees-of-freedom parameters, accounting for the Vol-of-Vol and the tail shape of the realized kernel...

We empirically evaluate a behavioural model with boundedly rational traders who disagree about the persistence of deviations from the fundamental stock price. Fundamentalist traders believe in mean-reversion, while chartists extrapolate trends. Agents gradually switch between the two rules,...

The forward premium puzzle (FPP) is the negative correlation between the forward premium and the realized exchange rate return at maturities of a month and beyond. Some recent evidence shows that at maturities of multiple years and at the highest intra day frequency the correlation is positive...