The mainstream model of option pricing is based on an exogenously given process of price movements. The implication of this assumption is that price movements are not affected by actions of market participants. However, if we assume that there are indeed impacts on the price movements it no...

Inspired by the theory of social imitation (Weidlich 1970) and its adaptation to financial markets by the Coherent Market Hypothesis (Vaga 1990), we present a behavioral model of stock prices that supports the overreaction hypothesis. Using our dynamic stock price model, we develop a two factor...