The aim of this paper is to show, within the mean-variance framework, how the market belief can be constructed as the result of the aggregation of heterogeneous beliefs and how the market equilibrium prices of risky assets can thus be determined. The heterogeneous beliefs are defined in terms of...

This paper extends the analysis of the seminal paper of Brock and Hommes (1998) on heterogeneous beliefs and routes to chaos in a simple asset price model in discrete-time to a model in continuous-time. The resulting model characterized mathematically by a system of stochastic delay differential...

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...

We consider a prediction market in which traders have heterogeneous prior beliefs in probabilities. In the two-state case, we derive necessary and sufficient conditions so that the prediction market is accurate in the sense that the equilibrium state price equals the mean probabilities of...

The market selection depends on agent's survival index, which is a function of agent's belief and risk preference. When preferences are identical, the survival index of an agent is a decreasing function of his belief accuracy and therefore agent survives if and only if he has the lowest survival...

Heterogeneity and evolutionary behaviour of investors are two of the most important characteristics of financial markets. This papers incorporates the adaptive behaviour of agents with heterogeneous beliefs and establishes an evolutionary capital asset pricing model (ECAPM) within the...

Heterogeneity and interacting among boundedly rational agents have received an increasing attention in the finance and economics literature. Recent developments on the role of heterogeneous beliefs on asset pricing and the adaptive behaviour of financial markets shed light into the complex...

When people agree to disagree, this paper examines the impact of the disagreement among agents on market equilibrium and equity premium. Within the standard mean variance framework, we consider a market of two risky assets, a riskless asset and two (and then a continuum of) agents who have...

Within a continuous-time framework, this paper proposes a stochastic heterogeneous agent model (HAM) of financial markets with time delays to unify various moving average rules used indiscrete-time HAMs. The time delay represents a memory length of a moving average rule indiscrete-time...