In this paper we investigate the effects of network topologies on asset price dynamics. We introduce network communications into a simple asset pricing model with heterogeneous beliefs. The agents may switch between several belief types according to their performance. The performance information...

In this paper we investigate the effects of network topologies on asset price dynamics. We introduce network communications into a simple asset pricing model with heterogeneous beliefs. The agents may switch between several belief types according to their performance. The performance information...

In this paper we study the dynamics of a simple asset pricing model describing the trading activity of heterogeneous agents in a "stylized" market. The economy in the model contains two assets: a bond with risk-less return and a dividend paying stock. The price of the stock is determined through...

A few recent papers have derived estimates of the representative agent's risk aversion by comparing the statistical density of asset returns and the state-price density. The implied risk aversion estimates obtained in these studies are puzzling, exhibiting (i) pronounced U-shaped patterns (a...

Traditional finance is built on the rationality paradigm. This chapter discusses simple models from an alternative approach in which financial markets are viewed as complex evolutionary systems. Agents are boundedly rational and base their investment decisions upon market forecasting heuristics....