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.

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.

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 Extension of the Capital Asset Pricing Model to Non-normal Dependence Structures

2007 ◽  
Vol 37 (1) ◽  
pp. 35-52
Author(s):  
Mark Johnston
Keyword(s):  
Asset Pricing ◽  
Asset Prices ◽  
Capital Asset Pricing ◽  
Pricing Model ◽  
Capital Asset ◽  
Marginal Distributions ◽  
Asset Pricing Model ◽  
Discount Factors ◽  
Stochastic Discount Factors ◽  
Normal Copula

The Capital Asset Pricing Model arises in an economy where agents have exponential utility functions and aggregate consumption is normally distributed, and gives the prices of assets with payoffs which are jointly normal with consumption. Such assets have normal marginal distributions and have dependence with consumption characterised by a normal copula. Wang has derived a transform which extends the CAPM by allowing pricing of assets in such an economy which have non-normal marginal distributions but still are normal-copula with consumption.Here we set out the stochastic discount factors corresponding to this version of the CAPM and to Wang’s transform, and show how to calculate stochastic discount factors and hence asset prices for assets whose dependence with consumption is non-normal. We show that the impact of dependency structure on asset prices is significant.

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.

Примјена модела вредновања капиталне активе у функцији одређивања очекиваних приноса предузећа на тржишту капитала Републике Српске // Application of Capital Asset Pricing Model in the function of determination of expected yield of companies in the capital markets Republic of Srpska

2018 ◽  
Vol 14 (24) ◽  
pp. 191
Author(s):  
Драган Јањић
Keyword(s):  
Asset Pricing ◽  
Asset Prices ◽  
Market Equilibrium ◽  
Capital Asset Pricing Model ◽  
Capital Asset Pricing ◽  
Pricing Model ◽  
Capital Asset ◽  
Financial Instrument ◽  
Asset Pricing Model

Резиме: Након што је Хери Маркович (енгл. Harry Markowitz) поставио прве темеље развоја портфолио теорије, Вилиам Шарп (енгл. William Sharpe), Џон Линтнер (енгл. John Lintner) и Јан Мосин (енгл. Jan Mossion) су почетком 60–их година 20. вијека развили модел вредновања капиталне активе (енгл. Capital Asset Pricing Model - САРМ). Први пут га је представио Вилиам Шарп објављивањем рада под називом „Модел вредновања капитала: теорија тржишне равнотеже у условима ризика” (енгл. Capital asset prices: a theory of market equilibrium under conditions of risk), који је 1990. године добио Нобелову награду за економију. Модел вредновања капиталне активе омогућава прецизно предвиђање односа између ризика и приноса одговарајућег финансијског инструмента. На развијеним тржиштима капитала инвеститори га често користе приликом израчунавања очекиване стопе приноса одговарајућег финансијског инструмента. Такође, модел се може користити и у друге сврхе, а све у циљу да инвеститорима олакша доношење важних пословних одлука. Иако модел није емпиријски потврђен и подложан је критикама појединих аутора, његова примјена је широка, искључиво због прецизног одређивања односа између ризика и приноса појединих финансијских инструмената и довољне тачности за многе важне примјене.Summary: When is Harry Markowitz made the frst foundations of the development of portfolio theory, William Shape, John Lintner and Jan Mossion in the early 60s of the 20th century are developed a Capital Asset Pricing Model - CAPM. The first time it was presented by William Shape, publication work entitled „Capital asset prices: a theory of market equilibrium under conditions of risk”, which in 1990 won the Nobel Prize for economy. Capital Asset Pricing Model allows accurate prediction of the relationship between risk and yield adequate financial instrument. In developed market equity investors often used this model when calculating the expected return of the corresponding financial instrument. Also, the model can also be used for other purposes, and in order to facilitate the investors making important business decisions. Although the model is not empirically verified and it is the subject of critiques by some authors, its use is broad because of precise determination of risk and yield relation in financial instruments and his appropriate accuracy.

scholarly journals Perspektif Asset Pricing Model dan Pengembangannya Pada Pasar Modal Indonesia

2020 ◽  
Vol 11 (1) ◽  
pp. 25
Author(s):  
Yunan Surono ◽  
Akhmad Irwansyah Siregar ◽  
R Adisetiawan
Keyword(s):  
Asset Pricing ◽  
Interest Rates ◽  
Stock Prices ◽  
Trading Volume ◽  
Arbitrage Pricing Theory ◽  
Pricing Model ◽  
Asset Pricing Model ◽  
Holding Period ◽  
Activity Factor ◽  
Stock Indexes

Every investor will pay attention to return and risk in investing in portfolios. In portfolio investment, this is known as the principle of high return high risk. To see this return and risk, 4 (four) models are known, namely 1) Capital Asset Pricing Model (CAPM) with beta factors (market risk), 2) French Fama models with beta, size and value factors, 3) Carhart model with factors beta, size, value and momentum, 4) the Arbitrage Pricing Theory (APT) model in this study, in addition to factors such as the model above, macro economic factors include economic growth, inflation, interest rates, the rupiah exchange rate against US dollars and the money supply. Models 1, 2 and 3 analyze from the fundamental side of the company while models 4 analyze from the macroeconomic side. Based on the theory of Ying (1966), Tauchen & Pitts (1983), Blume (1994), Lee & Swaminathan (2000), Gervais (2001) and Kaniel (2003) that the total trading volume affects the movement of stock indexes, stock prices and affects the magnitude of the level return and investment risk, then in this study the researchers added the total volume of activity factor as an effort to overcome the weaknesses found in the Carhart model where in calculations using the three sequential sort method, this model has not been able to record a holding period (the length of shares in the hands of investors) which in this study. The model with the addition of the total volume activity variable as a five factor pricing model is a model of the researcher's development. From the test results it can be concluded that the development model turned out to be better precision in estimating return and risk and its accuracy is more accurate than existing models.

The Distortion in Prices Due to Passive Investing

2021 ◽  
Author(s):  
Shmuel Baruch ◽  
Xiaodi Zhang
Keyword(s):  
Asset Pricing ◽  
Private Information ◽  
Asset Prices ◽  
Capital Asset Pricing ◽  
Pricing Model ◽  
Capital Asset ◽  
Conditional Capm ◽  
Asset Pricing Model ◽  
Ex Post ◽  
Passive Investing

In the capital asset pricing model (CAPM), it is ex post optimal to index. To examine the implications of market indexing, we develop a conditional CAPM with costless private information in which some investors are, for exogenous reasons, ex ante indexers. We show that, as more nonindexers become indexers, the price efficiency of stocks diminishes, asset prices comove, and the statistical fit (measured by R2) of the CAPM regression decreases. We also report asset prices at the limit, when 100% of the investors are market indexers. This paper was accepted by Tyler Shumway, finance.

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