Heterogeneous Expectations in Asset Pricing: Empirical Evidence from the S&P500

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

No 344, Research Paper Series from Quantitative Finance Research Centre, University of Technology, Sydney

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 ináation and deáation 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)
Pages: 31 pages
Date: 2014-03-01
New Economics Papers: this item is included in nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (73)

Published as: Chiarella, C., He, X. and Zwinkels, R. C. J., 2014, "Heterogeneous Expectations in Asset Pricing: Empirical Evidence from the S&P500", Journal of Economic Behavior and Organization, 105, 1-16.

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Related works:
Journal Article: Heterogeneous expectations in asset pricing: Empirical evidence from the S&P500 (2014)
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