Contagion mechanisms under heterogeneous beliefs

Yu Yan, Yan Tong and Yiming Wang

Applied Economics, 2025, vol. 57, issue 12, 1326-1350

Abstract: A continuous-time heterogeneous belief model is developed to discuss the mechanisms of the formation of contagion phenomena. Various mechanisms of contagion formation, such as price learning, information diffusion and extrapolative expectations, are incorporated into a unified framework. Calibration results from Hong Kong and the UK show that changes in the weights of the four types of traders affect the contagion phenomenon at different time intervals over time.

Date: 2025
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DOI: 10.1080/00036846.2024.2312261

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