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Heterogeneous Expectations in Asset Pricing: Empirical Evidence from the S&P 500Carl ChiarellaUniversity of Technology, Sydney - UTS Business School, Finance Discipline Group; Financial Research Network (FIRN) Xuezhong HeUniversity of Technology, Sydney (UTS) - School of Finance and Economics Remco C. J. ZwinkelsErasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE); Erasmus Research Institute of Management (ERIM); Tinbergen Institute December 7, 2009 Abstract: 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,G12 working papers seriesDate posted: December 7, 2009 ; Last revised: February 17, 2011Suggested CitationContact Information
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