We reconsider the derivation of the traditional capital asset pricing model (CAPM) in the discrete time setting for a portfolio of one riskless asset and many risky assets. In contrast to the standard setting, it is assumed that agents are heterogeneous in their conditional means and covariances...

This paper is a contribution to the literature on the explanatory power and calibration of heterogeneous asset pricing models. We set out a new stochastic market-fraction asset pricing model of fundamentalists and trend followers under a market maker. Our model explains key features of financial...

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...

This paper tests a simple market fraction asset pricing model with heterogeneous agents. By selecting a set of structural parameters of the model through a systematic procedure, we show that the autocorrelations (of returns, absolute returns and squared returns) of the market fraction model...

The equity premium forecasting literature provides ample evidence of predictability for both fundamental economic variables and non-fundamental variables, such as time-series momentum. In this paper, we study the role of investor setiment in equity premium predictability. Consistent with the...

We introduce a heterogeneous agent asset pricing model in continuous-time to show that, although trend chasing, switching and herding all contribute to market volatility in price and return and to volatility clustering, their impacts are different. The fluctuations of the market price and return...

Inspired by the theoretically oriented dynamic analysis of moving average rules in the model of Chiarella, He, and Hommes (CHH) [<italic>Journal of Economic Dynamics and Control</italic> 30 (2006), 1729—1753], this paper conducts a dynamic analysis of a more realistic microstructure model of continuous double...

This paper tests a simple market fraction asset pricing model with heterogeneous agents. By selecting a set of structural parameters of the model through a systematic procedure, we show that the autocorrelations (of returns, absolute returns and squared returns) of the market fraction model...

We develop a continuous-time asset price model to capture the time series momentum documented recently. The underlying stochastic delay differential system facilitates the analysis of effects of different time horizons used by momentum trading. By studying an optimal asset allocation problem, we...

We propose a continuous-time heterogeneous agent model consisting of fundamental, momentum, and contrarian traders to explain the significant time series momentum. We show that the performance of momentum strategy is determined by both time horizon and the market dominance of momentum traders....