We have set out a general framework for adaptive belief systems in asset pricing thery. Fluctuations in prices and returns are driven by an evolutionary dynamics between traders with different expectations about prices.

This paper investigates the dynamics in the simple present discounted value asset pricing model with heterogeneous beliefs.

This paper puts forth a concept of Adptivety Rational Equilibrium (A.R.E) where agents base decisions upon predictions of future values of endogenous variables whose actual values are determined by equilibrium equations.