This paper develops and tests a heterogeneous agents model for the option market. Our agents have different beliefs about the future level of volatility of the underlying stock index and trade accordingly. We consider two types of agents: fundamentalists and chartists, who are able to switch...

This paper proposes a novel approach to determine whether mutual funds time the market. The proposed approach builds on a heterogeneous agent model, where investors switch between cash and stocks depending on a certain switching rule. This approach is more flexible, intuitive, and parsimonious...

Purpose -The purpose of this paper is to investigate the impact of individual investor sentiment on the return process and conditional volatility of three main US market indices (Dow Jones Industrial Average, S&P500 and Nasdaq100). Individual investor sentiment is measured by aggregate money...

This paper jointly analyzes traditional and behavioral concepts in a simple experimental setting which allows for the assessment of the relative importance of each factor and their joint behavior. Various hypotheses are tested in three portfolio choice models. Markowitz [Markowitz, H., 1952....

Purpose – The purpose of this paper is to investigate the impact of individual investor sentiment on the return process and conditional volatility of three main US market indices (Dow Jones Industrial Average, S&P500 and Nasdaq100). Individual investor sentiment is measured by aggregate money...

In this paper, we examine the role of national culture in corporate takeover decisions, by arguing that managerial risk tolerance (a combination of risk aversion and risk perception), at the national level, is a cultural trait and affects the expected net synergies CEOs require. We propose a...

Purpose: This paper documents a strong violation of the law of one price surrounding a large rights issue. Design/methodology/approach: If prices are right, the relation between the prices of shares and rights follows the outcome of a simple calculation. Findings: In the case of Royal Imtech...

This paper empirically assesses heterogeneous expectations in asset pricing. We use a maximum likelihood approach on S&P500 data to estimate a structural model. Our empirical results are consistent with a market populated with fundamentalists and chartists. In addition, agents switch between...

In order to study the expectation formation of financial institutions in the foreign exchange market we develop and apply a recursive selection and estimation algorithm to a dataset of surveyed foreign exchange market expectations. Responses are classified into two groups and forecasting models...

This paper combines survey forecasts with a heterogeneous agent model to examine the dispersion of expectations of participants in the foreign exchange market. We find distinct variations in the level of dispersion and document that dispersion arises because of the combined effect of market...