The equity premium forecasting literature provides ample evidence of predictability for both fundamental economic variables and non-fundamental variables, such as time-series momentum. In this paper, we study the role of investor setiment in equity premium predictability. Consistent with the...

This paper tests a simple market fraction asset pricing model with heterogeneous agents. By selecting a set of structural parameters of the model through a systematic procedure, we show that the autocorrelations (of returns, absolute returns and squared returns) of the market fraction model...

We develop a continuous-time asset price model to capture the time series momentum documented recently. The underlying stochastic delay differential system facilitates the analysis of effects of different time horizons used by momentum trading. By studying an optimal asset allocation problem, we...

How do traders process and learn from market information, what trading strategies should they use, and how does learning affect the market? This paper proposes a learning model of an articial limit order market with asymmetric information to address these issues. Using a genetic algorithm as a...

When agents agree to disagree about the expected growth rate of the aggregate endowment process, we study the asset price dynamics under "Keeping up with the Joneses" (KUJ) meaning that each agent maximizes the expected life-time CRRA utility of his relative consumption to the other agent in the...

We propose a continuous-time heterogeneous agent model consisting of fundamental, momentum, and contrarian traders to explain the significant time series momentum. We show that the market under-reacts in short-run and overreacts in long-run when momentum traders dominate the market, which...

This paper empirically assesses heterogeneous expectations in asset pricing. We use a maximum likelihood approach on S&P500 data to estimate a structural model. Our empirical results are consistent with a market populated with fundamentalists and chartists. In addition, agents switch between...

This paper contributes to the development of recent literature on the explanation power and calibration issue of heterogeneous asset pricing models by presenting a simple stochastic market fraction asset pricing model of two types of traders (fundamentalists and trend followers) under a market...

Inspired by the theoretically oriented dynamic analysis of moving average rules in Chiarella, He and Hommes (CHH) (2006a) model, this paper conducts a dynamic analysis of a microstructure model of continuous double auctions in which the probability of heterogeneous agents to trade is determined...

Within the standard mean-variance framework, this paper provides a procedure to aggregate the heterogeneous beliefs in not only risk preferences and expected payoffs but also variances/covariances into a market consensus belief. Consequently, an asset equilibrium price under heterogeneous...