scholarly journals Speculative asset price dynamics and wealth taxes

2021 ◽  
Author(s):  
Sarah Mignot ◽  
Fabio Tramontana ◽  
Frank Westerhoff
Keyword(s):  
Asset Pricing ◽  
Financial Markets ◽  
Local Stability ◽  
Asset Price ◽  
Stability Domain ◽  
Steady States ◽  
Price Dynamics ◽  
Pricing Model ◽  
Asset Pricing Model ◽  
Fundamental Value

AbstractBased on the seminal asset-pricing model by Brock and Hommes (J Econ Dyn Control 22:1235–1274, 1998), we analytically show that higher wealth taxes increase the risky asset’s fundamental value, enlarge its local stability domain, may prevent the birth of nonfundamental steady states and, if they exist, reduce the risky asset’s mispricing. We furthermore find that higher wealth taxes may hinder the emergence of endogenous asset price oscillations and, if they exist, dampen their amplitudes. Since oscillatory price dynamics may be associated with lower mispricing than locally stable nonfundamental steady states, policymakers may not always want to suppress them by imposing (too low) wealth taxes. Overall, however, our study suggests that wealth taxes tend to stabilize the dynamics of financial markets.

EFFECTS OF CONTRARIAN INVESTOR TYPE IN ASSET PRICE DYNAMICS

2009 ◽  
Vol 19 (08) ◽  
pp. 2463-2472 ◽  
Author(s):  
NATASHA KIRBY ◽  
ANDREW FOSTER
Keyword(s):  
Asset Pricing ◽  
Chaotic Behavior ◽  
Price Change ◽  
Asset Price ◽  
Period Doubling ◽  
Global Bifurcations ◽  
Pricing Model ◽  
Significant Group ◽  
Asset Pricing Model ◽  
Planar Maps

We develop an asset pricing model based on the interaction of heterogeneous trading groups. In addition to the two main trader groups, fundamentalists and trend-chasing chartists, we include a third significant group known as contrarian chartists. We model the case of opportunistic contrarian behavior, where the contrarian group disagrees with the trend-chasing chartists only when the return differential is high. We also consider absolute contrarian behavior, in which the contrarians consistently disagree with trend-chasers. The models are nonlinear planar maps, exhibiting period doubling, Neimark–Sacker and global bifurcations leading to local chaotic behavior. Absolute contrarian behavior is found to have a moderating effect on price change, while opportunistic contrarian behavior is found to further complicate the price cycles present in other models.

Fact, Fiction, and the Size Effect

2018 ◽  
Keyword(s):  
Asset Pricing ◽  
Size Effect ◽  
Financial Markets ◽  
Market Efficiency ◽  
Risk Adjustment ◽  
Empirical Work ◽  
Pricing Model ◽  
Asset Pricing Model ◽  
Data Errors ◽  
Small Stock

In the earliest days of empirical work in academic finance, the size effect was the first market anomaly to challenge the standard asset pricing model and prompt debates about market efficiency. The notion that small stocks have higher average returns than large stocks, even after risk adjustment, was a path-breaking discovery, and for decades it has been taken as an unwavering fact of financial markets. In practice, the discovery of the size effect fueled a crowd of small-cap indexes and active funds to the point that the investment landscape is now segmented into large and small stock universes. However, despite its long and illustrious history in academia and its commonplace acceptance in practice, there is still confusion and debate about the size effect. We examine many claims about the size effect and aim to clarify some of the misunderstanding surrounding it by performing simple tests using publicly available data. For one, using 90+ years of U.S. data, there is no evidence of a pure size effect; moreover, it may not have existed in the first place, if not for data errors and insufficient adjustments for risk and liquidity.

scholarly journals HETEROGENEOUS EXPECTATIONS AND ASSET PRICE DYNAMICS

2020 ◽  
pp. 1-31 ◽  
Author(s):  
Noemi Schmitt
Keyword(s):  
Financial Markets ◽  
Asset Price ◽  
Realistic Model ◽  
Fixed Number ◽  
Time Varying ◽  
Pricing Model ◽  
Rational Agents ◽  
Asset Pricing Model ◽  
Method Of Simulated Moments ◽  
Agents Heterogeneity

Within the seminal asset-pricing model by Brock and Hommes (Journal of Economic Dynamics Control 22, 1235–1274, 1998), heterogeneous boundedly rational agents choose between a fixed number of expectation rules to forecast asset prices. However, agents’ heterogeneity is limited in the sense that they typically switch between a representative technical and a representative fundamental expectation rule. Here, we generalize their framework by considering that all agents follow their own time-varying technical and fundamental expectation rules. Estimating our model using the method of simulated moments reveals that it is able to explain the statistical properties of the daily and monthly behavior of the S&P500 quite well. Moreover, our analysis reveals that heterogeneity is not only a realistic model property but clearly helps to explain the intricate dynamics of financial markets.

scholarly journals Analysis of a Heterogeneous Trader Model for Asset Price Dynamics

2011 ◽  
Vol 2011 ◽  
pp. 1-12 ◽  
Author(s):  
Andrew Foster ◽  
Natasha Kirby
Keyword(s):  
Asset Pricing ◽  
Fixed Points ◽  
Asset Price ◽  
Homoclinic Bifurcation ◽  
Heterogeneous Beliefs ◽  
Financial Asset ◽  
Global Bifurcations ◽  
Pricing Model ◽  
Asset Pricing Model ◽  
Stability And Bifurcations

We examine an asset pricing model of Westerhoff (2005). The model incorporates heterogeneous beliefs among traders, specifically fundamentalists and trend-chasing chartists. The form of the model is shown here to be a nonlinear planar map. Since it contains a single parameter, the model may be considered the simplest effective model yet derived for financial asset pricing with heterogeneous trading. Analysis of the map yields results for stability and bifurcations of fixed points and periodic orbits. The model has intricate attractor basin behavior and global bifurcations to chaos: symmetric homoclinic bifurcation and boundary crisis.

Asymmetric Information, Heterogeneous Belief and Risky Asset Pricing

2012 ◽  
Vol 430-432 ◽  
pp. 1095-1098
Author(s):  
Xiao Qiang Yu ◽  
Shan Cun Liu
Keyword(s):  
Asset Pricing ◽  
Asymmetric Information ◽  
Empirical Research ◽  
Asset Price ◽  
Risky Asset ◽  
Pricing Model ◽  
Asset Pricing Model

In this paper, we put forward the assumption that investors have asymmetric information and heterogeneous belief and derive an asset pricing model. The model suggests the extent of asymmetric information or heterogeneous belief is positively correlated with the risky asset price, which matches the former empirical research.

scholarly journals Heterogeneous traders, price-volume signals, and complex asset price dynamics

2005 ◽  
Vol 2005 (1) ◽  
pp. 19-29 ◽  
Author(s):  
Frank H. Westerhoff
Keyword(s):  
Asset Pricing ◽  
Asset Prices ◽  
Trading Volume ◽  
Deterministic Model ◽  
Asset Price ◽  
Pricing Model ◽  
Price Trend ◽  
Asset Pricing Model ◽  
Intrinsic Values ◽  
Current Price

We seek to develop a novel asset pricing model with heterogeneous traders. Fundamental traders expect that asset prices converge towards their intrinsic values, whereas chart traders rely on both price and volume signals to determine their orders. To be precise, the larger the trading volume, the more they believe in the persistence of the current price trend. Simulations of our nonlinear deterministic model reveal that interactions between fundamentalists and chartists may cause intricate endogenous price fluctuations. Contrary to the intuition, we find that chart trading may increase market stability.

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