Heterogeneous Expectations in Asset Pricing: Empirical Evidence from the S&P 500

33 Pages Posted: 7 Dec 2009 Last revised: 6 May 2016

See all articles by Carl Chiarella

Carl Chiarella

University of Technology, Sydney - UTS Business School, Finance Discipline Group

Xuezhong He

University of Technology Sydney (UTS) - Finance Discipline Group, Business School; Financial Research Network (FIRN)

Remco C. J. Zwinkels

Vrije Universiteit Amsterdam; Tinbergen Institute - Tinbergen Institute Amsterdam (TIA)

Date Written: 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.

Keywords: asset pricing, heterogeneous agents, technical analysis

JEL Classification: G11,G12

Suggested Citation

Chiarella, Carl and He, Xue-Zhong 'Tony' and Zwinkels, Remco C.J., Heterogeneous Expectations in Asset Pricing: Empirical Evidence from the S&P 500 (December 7, 2009). Journal of Economic Behavior and Organization, Vol. 105, 2014. Available at SSRN: https://ssrn.com/abstract=1519987 or http://dx.doi.org/10.2139/ssrn.1519987

Carl Chiarella

University of Technology, Sydney - UTS Business School, Finance Discipline Group ( email )

PO Box 123
Broadway, NSW 2007
Australia
+61 2 9514 7719 (Phone)
+61 2 9514 7711 (Fax)

HOME PAGE: http://www.business.uts.edu.au/finance/

Xue-Zhong 'Tony' He

University of Technology Sydney (UTS) - Finance Discipline Group, Business School ( email )

Haymarket
Sydney, NSW 2007
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Remco C.J. Zwinkels (Contact Author)

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, NL-1081HV
Netherlands
+31 20 59 85220 (Phone)

HOME PAGE: http://research.vu.nl/en/persons/remco-zwinkels

Tinbergen Institute - Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

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