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...

This paper contributes to the development of recent literature on the explanation power and calibration issue of heterogeneous asset pricing models by presenting a simple stochastic market fraction asset pricing model of two types of traders (fundamentalists and trend followers) under a market...

With the standard mean variance framework, by assuming heterogeneity and bounded rationality of investors, this paper examines their impact on the market equilibrium and implications to the portfolio analysis. By constructing a market consensus belief, we establish market equilibrium prices of...

We investigate monetary policy under the assumption that a country’s capital market is “open” under the WTO framework while the exchange rate is fixed. Our purpose is to determine if it is possible in this case for the economy to maintain an effective monetary policy for stabilizing the...

As the main building blocks of the modern finance theory, homogeneity and rational expectation have faced difficulty in explaining many market anomalies, stylized factors, and market inefficiency in empirical studies. As a result, heterogeneity and bounded rationality have been used as an...

We develop a behavioral commodity market model with consumers, producers and heterogeneous speculators to characterize the nature of commodity price fluctuations and to explore the efectiveness of price stabilization schemes. Within our model, nonlinear interactions between market participants...

Long-range dependence in volatility is one of the most prominent examples of applications in financial market research involving universal power laws. Its characterization has recently spurred attempts at theoretical explanation of the underlying mechanism. This paper contributes to this recent...

It is known that simple price limiters may have unexpected consequences in irregular commodity price fluctuations between bull and bear markets and complicated impacts on the size of buffer stocks. In particular, imposing a lower price boundary may lead to a huge buffer stock, e.g. to a ?butter...

Motivated by recent development in structural agent models on asset pricing, explanation power and calibration issue of those models, this paper presents a simple market fraction model of two types of traders - fundamentalists and trend followers - under a market maker scenario. It is found that...