Asset Price Dynamics with Heterogeneous Beliefs and Local Network Interactions

46 Pages Posted: 26 Jun 2013 Last revised: 30 Sep 2013

See all articles by Valentyn Panchenko

Valentyn Panchenko

UNSW Business School, Economics, University of New South Wales

Sergiy Gerasymchuk

ING Group

Oleg V. Pavlov

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

Date Written: June 20, 2013

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.

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

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

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: https://ssrn.com/abstract=2284547 or http://dx.doi.org/10.2139/ssrn.2284547

Valentyn Panchenko (Contact Author)

UNSW Business School, Economics, University of New South Wales ( email )

Sydney, NSW 2052
Australia

HOME PAGE: http://research.economics.unsw.edu.au/vpanchenko

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

HOME PAGE: http://www.olegpavlov.org

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
89
Abstract Views
747
rank
317,955
PlumX Metrics