Heterogeneous Expectations in Asset Pricing: Empirical Evidence from the S&P 500
University of Technology, Sydney - UTS Business School, Finance Discipline Group; Financial Research Network (FIRN)
University of Technology Sydney (UTS) - School of Finance and Economics
Remco C. J. Zwinkels
VU University Amsterdam; Tinbergen Institute
December 7, 2009
This paper empirically estimates a heterogeneous agents model using S&P 500 data. While previous studies on heterogeneous agents models typically resort to simulation techniques, our empirical results indicate that the market is populated with fundamentalists, chartists, and noise traders. In addition, agents switch between these groups conditional on their previous performance. As a result, the model is capable of explaining the inflation and deflation of bubbles. Finally, it is reported that the model can explain the stylized facts of financial market such as heavy tails and volatility clustering.
Number of Pages in PDF File: 33
Keywords: asset pricing, heterogeneous agents, technical analysis
JEL Classification: G11,G12working papers series
Date posted: December 7, 2009 ; Last revised: February 17, 2011
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