Influence of heterogeneous beliefs on volatility when agents' degree of confidence differs

This study provides theoretical and empirical evidences of the effects of heterogeneous beliefs on asset volatility when agents' level of confidence differs. We derive a stock price formula that is applied to simulating stock volatility using Monte Carlo method. Through the simulation results, we observe that the influence of heterogeneous beliefs on volatility depends on the confident agents' level of optimism. Some empirical results are provided to confirm those observations.