Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5098540 | Journal of Economic Dynamics and Control | 2014 | 25 Pages |
Abstract
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 and the level of the significant autocorrelations (ACs) of the absolute and squared returns increase with the intensities of herding and trend chasing based on long time horizon. However an increase in switching intensity reduces the return volatility and in particular a low switching intensity reduces the price volatility and increases the level of the significant ACs, but the effect becomes opposite when the switching intensity is high. We also show that market noise plays a more important role than fundamental noise on the power-law behavior of returns.
Keywords
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Corrado Di Guilmi, Xue-Zhong He, Kai Li,