This study develops an agent-based computational stock market model in which each trader’s buying and selling decisions are endogenously determined by multiple factors: namely, firm profitability, past stock price movement, and imitation of other traders. Each trader can switch from being a...

We develop a dynamic model of belief dispersion with a continuum of investors differing in beliefs. The model is tractable and qualitatively matches many of the empirical regularities in a stock price, its mean return, volatility, and trading volume. We find that the stock price is convex in...

We develop a dynamic model of belief dispersion with a continuum of investors differing in beliefs. The model is tractable and qualitatively matches many of the empirical regularities in a stock price, its mean return, volatility, and trading volume. We find that the stock price is convex in...

This paper shows that monetary policy decisions have a significant effect on investor sentiment. The effect of monetary news on sentiment depends on market conditions (bull versus bear market). We also find that monetary policy actions in bear market periods have a larger effect on stocks that...

We study the dynamics of a Lucas-tree model with finitely lived agents who "learn from experience." Individuals update expectations by Bayesian learning based on observations from their own lifetimes. In this model, the stock price exhibits stochastic boom-and-bust fluctuations around the...

Investors' return expectations are pivotal in stock markets, but the reasoning behind these expectations remains a black box for economists. This paper sheds light on economic agents' mental models - their subjective understanding - of the stock market, drawing on surveys with the US general...

Investors' return expectations are pivotal in stock markets, but the reasoning behind these expectations remains a black box for economists. This paper sheds light on economic agents' mental models - their subjective understanding - of the stock market, drawing on surveys with the US general...

This paper reviews the literature examining how costs of monitoring for, acquiring, and analyzing firm disclosures – collectively, “disclosure processing costs” – affect investor information choices, trades, and market outcomes. The existence of disclosure processing costs means that...

We study the dynamics of a Lucas-tree model with finitely lived agents who 'learn from experience.' Individuals update expectations by Bayesian learning based on observations from their own lifetimes. In this model, the stock price exhibits stochastic boom-and-bust fluctuations around the...

We study the dynamics of a Lucas-tree model with finitely lived agents who "learn from experience." Individuals update expectations by Bayesian learning based on observations from their own lifetimes. In this model, the stock price exhibits stochastic boom-and-bust fluctuations around the...