Comparing Behavioural Heterogeneity Across Asset Classes
43 Pages Posted: 1 Apr 2017 Last revised: 15 Sep 2017
Date Written: June 30, 2017
We estimate a generic agent-based model in which agents have heterogeneous beliefs about the future price to see to what extent behaviour differs across assets, and what this implies for market stability. We find evidence for behavioural heterogeneity for all asset classes, except for equities. Heterogeneity is especially pronounced for macro-economic variables. Agents update their beliefs frequently in financial markets, and only gradually in the case of macro-economic variables. Consequently, we find that the probability of behavioural bubbles is substantially higher for the macro-economic variables than for financial assets.
Keywords: financial markets, heterogeneous expectations, market stability
JEL Classification: E31, G12, G15
Suggested Citation: Suggested Citation