Showing 1 - 10 of 339
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...
Persistent link: https://www.econbiz.de/10005537428
The conditional CAPM with time-varying betas has been widely used to explain the cross-section of asset returns. However, most of the literature on time-varying beta is motivated by econometric estimation using various latent risk factors rather than explicit modelling of the stochastic...
Persistent link: https://www.econbiz.de/10010849038
Heterogeneity and evolutionary behaviour of investors are two of the most important characteristics of financial markets. This paper incorporates the adaptive behaviour of agents with heterogeneous beliefs and establishes an evolutionary capital asset pricing model (ECAPM) within the...
Persistent link: https://www.econbiz.de/10010866548
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...
Persistent link: https://www.econbiz.de/10004984471
This chapter surveys the boundedly rational heterogeneous agent (BRHA) models of financial markets, to the development of which the authors and several co-authors have contributed in various papers. We give particular emphasis to role of the market clearing mechanism used, the utility function...
Persistent link: https://www.econbiz.de/10004984519
Following the framework of a one risky - one riskless asset model developed by Brock and Hommes (1998), this paper considers a discrete-time model of a financial market where heterogeneous groups of agents allocate their wealth amongst multiple risky assets and a riskless asset. Agents follow...
Persistent link: https://www.econbiz.de/10004984536
By taking into account conditional expectations and the dependence of the systematic risk of asset returns on micro- and macro-economic factors, the conditional CAPM with time-varying betas displays superiority in explaining the cross-section of returns and anomalies in a number of empirical...
Persistent link: https://www.econbiz.de/10008492100
Persistent link: https://www.econbiz.de/10005127452
It is believed that diversity is good for our society, but is it good for financial markets? In particular, does the diversity with respect to beliefs among investors reduce the market risk of risky assets? The current paper aims to answer this question. Within the standard mean-variance...
Persistent link: https://www.econbiz.de/10009276887
This article surveys boundedly rational heterogeneous agent (BRHA) models of financial markets. We give particular emphasis to the role of the market clearing mechanism used, the utility function of the investors, the interaction of price and wealth dynamics, and calibration of this class of...
Persistent link: https://www.econbiz.de/10009360084