Kurz, Mordecai; Jin, Hehui; Motolese, Maurizio - In: Annals of Finance 1 (2005) 2, pp. 109-147
We show the dynamics of diverse beliefs is the primary propagation mechanism of volatility in asset markets. Hence, we … treat the characteristics of the market beliefs as a primary, primitive, explanation of market volatility. We study an … economy with stock and riskless bond markets and formulate a financial equilibrium model with diverse and time varying beliefs …