Abstract

http://ssrn.com/abstract=2284547
 
 

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Asset Price Dynamics with Heterogeneous Beliefs and Local Network Interactions


Valentyn Panchenko


University of New South Wales; Centre for International Finance and Regulation (CIFR)

Sergiy Gerasymchuk


ING Group

Oleg V. Pavlov


Worcester Polytechnic Institute (WPI) - Department of Social Science & Policy Studies

June 20, 2013

Journal of Economic Dynamics and Control, Forthcoming, doi:10.1016/j.jedc.2013.06.015
UNSW Australian School of Business Research Paper No. 2013-18

Abstract:     
In this paper we investigate the effects of network topologies on asset price dynamics. We introduce network communications into a simple asset pricing model with heterogeneous beliefs. The agents may switch between several belief types according to their performance. The performance information is available to the agents only locally through their own experience and the experience of other agents directly connected to them. We model the communications with four commonly considered network topologies: a fully connected network, a regular lattice, a small world, and a random graph. The results show that the network topologies influences asset price dynamics in terms of the regions of stability, amplitudes of fluctuations and statistical properties.

Number of Pages in PDF File: 46

Keywords: asset pricing, local interactions, networks, random graph, small world, heterogeneous beliefs, price dynamics

JEL Classification: C45, C62, C63, D84, G12

Accepted Paper Series


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Date posted: June 26, 2013 ; Last revised: September 30, 2013

Suggested Citation

Panchenko, Valentyn and Gerasymchuk, Sergiy and Pavlov, Oleg V., Asset Price Dynamics with Heterogeneous Beliefs and Local Network Interactions (June 20, 2013). Journal of Economic Dynamics and Control, Forthcoming, doi:10.1016/j.jedc.2013.06.015; UNSW Australian School of Business Research Paper No. 2013-18. Available at SSRN: http://ssrn.com/abstract=2284547 or http://dx.doi.org/10.2139/ssrn.2284547

Contact Information

Valentyn Panchenko (Contact Author)
University of New South Wales ( email )
Sydney, NSW 2052
Australia
HOME PAGE: http://research.economics.unsw.edu.au/vpanchenko

Centre for International Finance and Regulation (CIFR) ( email )
Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

Sergiy Gerasymchuk
ING Group ( email )
Amsterdam
Netherlands
Oleg V. Pavlov
Worcester Polytechnic Institute (WPI) - Department of Social Science & Policy Studies ( email )
100 Institute Road
Worcester, MA 01609
United States
508-831-5234 (Phone)
508-831-5892 (Fax)
HOME PAGE: http://users.wpi.edu/~opavlov/
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