This paper examines whether trading based on market sentiment can explain mispricing in S&P 500 options. We test the heterogeneous agent s option pricing model developed in Frijns et al. (2010), where our agents have different beliefs about the future level of market volatility and trade...

This paper examines whether trading based on market sentiment can explain mispricing in S&P 500 options. We test the heterogeneous agent s option pricing model developed in Frijns et al. (2010), where our agents have different beliefs about the future level of market volatility and trade...

The recent housing market boom and bust in the United States illustrates that real estate returns are characterized by short-term positive serial correlation and long-term mean reversion to fundamental values. We develop an econometric model that includes these two components, but with weights...

We estimate a dynamic heterogeneous agents model for the British pound during the European monetary system crisis. We illustrate the chain of events leading to the suspension of the pound from the exchange rate mechanism in terms of switching beliefs, from fundamentalist to chartist.

In this paper, we contribute to the literature investigating the impact of FDI on host country economic growth by distinguishing between the growth effects of horizontal (market seeking) FDI and vertical (efficiency seeking) FDI. Using a new database, we estimate the growth effects of vertical...

GARCH-type models have been very successful in describing the volatility dynamics of financial return series for short periods of time. However, for example macroeconomic events may cause the structure of volatility to change and the assumption of stationarity is no longer plausible. In order to...

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...