We introduce a heterogeneous agent asset pricing model in continuoustime to show that trend chasing, switching and herding all contribute to market volatility in price and return and volatility clustering, but their impact are different. On the one hand, the fluctuations of market price and...

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...

This study empirically examines the effect of foreign exchange (FX) market liquidity risk and volatility on the excess returns of currency carry trades. In contrast to the existent literature, we construct an alternative proxy of liquidity risk - violations of no arbitrage bounds in the forward...

This paper considers a diversified world stock index in a continuous financial market with the growth optimal portfolio (GOP) as the reference unit or benchmark. Diversified broadly based portfolios, which include major world stock market indices, are shown to approximate the GOP. It is...

This paper seeks to estimate a multifactor volatility model so as to describe the dynamics of interest rate markets, using data from the highly liquid but short term futures markets. The difficult problem of estimating such multifactor models is resolved by using a genetic algorithm to carry out...