Heterogeneous expectations in asset pricing: Empirical evidence from the S&P500

Carl Chiarella, Xuezhong (Tony) He () and Remco Zwinkels ()

Journal of Economic Behavior & Organization, 2014, vol. 105, issue C, 1-16

Abstract: This paper empirically assesses heterogeneous expectations in asset pricing. We use a maximum likelihood approach on S&P500 data to estimate a structural model. Our empirical results are consistent with a market populated with fundamentalists and chartists. In addition, agents switch between these groups conditional on their previous performance. The results imply that the model can explain the inflation and deflation of bubbles. Finally, the model is shown to be in the deterministically stable region, but produces stochastic bubbles of similar length and magnitude as empirically observed.

Keywords: Asset pricing; Agent based models; Fundamental analysis; Technical analysis; Momentum trading (search for similar items in EconPapers)
JEL-codes: G11 G12 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (72)

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Working Paper: Heterogeneous Expectations in Asset Pricing: Empirical Evidence from the S&P500 (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:105:y:2014:i:c:p:1-16

DOI: 10.1016/j.jebo.2014.03.003

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